List of Allowable Itemized Deductions

There are several tax deductions available to taxpayers through itemization.tax forms image by Chad McDermott from Fotolia.com

When preparing federal income taxes each year there are many ways to reduce the amount of tax liability. The Internal Revenue Service allows for a number of itemized deductions to reduce owed taxes that may apply to those people who can get more benefit from itemizing than from taking the standard deduction available to them.

Medical and Dental Expenses

If a taxpayer has excessive medical or dental expenses over the course of the year, they may be deductible from the taxes owed for that year. The expenses are deductible only if the total medical and dental bills for the tax year exceed 7.5 percent of the taxpayer's adjusted gross income (AGI). For example, if a person's AGI is $100,000, then only those expenses over $7,500 will be deductible.

There are a couple of ways to reduce taxes based on your home mortgage. If a new house is purchased and the acquisition is worth less than $1 million, then the charges paid to obtain the mortgage on the property and any prepaid interest are deductible.

In addition, all interest paid on a home mortgage throughout the year may be deductible as well. This deduction is possible if the interest is paid on a loan secured by an investment property or the qualified residence of the taxpayer or a second home.

When damage or theft affects the home, household items or vehicles the homeowner may be able to deduct the loss from federal income taxes. The loss is only deductible if the losses were not covered by insurance.

These losses do not include the normal depreciation of items or gradual damage done by insects or other culprits. The damage must come from a sudden and unexpected source such as a fire, earthquake, flood, vandalism, robbery or other disaster of that nature in order to qualify for the deduction.

Taxpayers can deduct taxes for the use of the home or automobile for business purposes if they are self-employed or are employed by another person or company. In order to qualify for the home deduction, the person must use a portion of the home as the principal place of business or the place where they meet with clients or patients. Some deductions require exclusive use of a portion of the home for business purposes, while other deductions allow for business and personal use. The percentage of the home used for business will determine the amount of the real estate taxes, mortgage, rent, interest, losses, utilities, insurance and repairs that may be deducted.

Taxpayers can deduct taxes for the use of their car for business purposes as well. If the vehicle is used exclusively for business, then a complete deduction can be made for mileage rate, gasoline, oil, repairs, tires, insurance, registration fees, licenses and depreciation. If the vehicle is used for business and personal use, then only the business portion may be deducted.

Some taxpayers may deduct up to $4,000 of educational expenses used to pay tuition and fees to an institution of higher learning. The taxpayer must have a qualifying income and the deductions may not include personal expenses such as room and board or other living expenses. Interest on student loans is also deductible.