Biden tax plan series
WHAT are itemized deductions?
Itemized deductions are expenses that can be deducted from your Adjusted Gross Income (AGI) to reduce your taxable income. Such deductions permit you to pay less in taxes than if you take the standard deduction. Allowable itemized deductions include property taxes, mortgage interest, and charitable gifts.
In summary:
- An itemized deduction is an expense that can be subtracted from your adjusted gross income (AGI) to reduce your tax bill.
- Use Schedule A of Form 1040 to list your itemized deductions.
Current tax law
- Taxpayers who itemize deductions can claim a maximum of $10,000 for state and local income or sales taxes and property taxes paid.
- This negatively impacts taxpayers with high property taxes and state income taxes.
Proposed tax changes
- The $10,000 limit on state and local taxes would be eliminated under current proposals.
- You’ll be able to utilize itemized deductions in full. This is good. One of the few under the current administration.
- But there are proposals to limit deductions for those in higher income tax brackets.
- One such proposal would limit itemized deductions for taxpayers earning more than $400,000.
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Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation.
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He retired after 50 years of defending taxpayers audited by the IRS, EDD, BOE and other governmental agencies. He published a book on “How to Avoid or Survive IRS Audits” that’s available at Amazon. Readers may email tax questions to [email protected].