Itemized deduction

Abstract: This paper examines the itemized deduction for donations of property to charitable organizations, its benefits to charitable organizations and their beneficiaries, and the associated tax expenditur...

Abstract: A method and system identifies users who benefit from filing itemized deductions over standardized deductions to reduce an average time consumed for users preparing tax returns with a tax return preparation system, according to one embodiment. The method and system receives user data that is associated with a user, and applies the user data to a predictive model to cause the predictive model to determine a likelihood that the user will decrease his/her taxable income by filing an itemized deduction, according to one embodiment. The method and system deemphasizes and/or postpones the presentation of tax return questions that are related to the itemized deduction, if the likelihood that the user will decrease his/her taxable income by filing the itemized deduction is below a threshold, to reduce a quantity of time consumed by the user to prepare his/her tax return with a tax return preparation system, according to one embodiment.

Abstract: In U.S. federal income tax, the standard deduction, along with the personal exemptions, provides taxpayers with a minimum amount of untaxed income, effectively creating a “zero bracket amount.” For historical and political reasons, however, the standard deduction also operates as a simplified substitute for the itemized deductions, such as the deductions for extraordinary medical expenses, charitable contributions, and home mortgage interest. This seemingly reasonable compromise in fact leads to substantial, and surprising, conceptual complexity. In particular, close analysis of each of the two roles shows that their effects, and related criticisms, are often contradictory, which in turn makes it difficult to have coherent debates regarding the proper roles of the standard deduction and the personal deductions. This article argues that, while the standard deduction is worse than we think it is, it is also easier to fix than we think it is. We can replace the standard deduction with a true, independent zero bracket amount and a floor under the itemized deductions while staying revenue-and distribution-neutral. This would effectively divorce the two roles of the standard deduction – zero bracket amount and simplification of the itemized deductions – leading to more coherence in individual income taxation and giving more flexibility to policymakers. This article proposes further to disaggregate the single floor under the itemized deductions into multiple, independent floors under each itemized deduction. This also would lead to greater coherence and flexibility in tax system design. While creating multiple floors would marginally increase complexity for some taxpayers, the costs of such complexity are overstated relative to the benefits of more accuracy and coherence.

Abstract: I have found that most itemized deductions remain about the same from year to year for most of my clients. Their mortgage interest and property taxes usually don’t fluctuate very much. They donate about the same amount to charities each year. However, one deduction that changes significantly from year to year is medical expenses. Expenses for doctors, dentists, hospitals, health insurance, and other related items can be deducted from your taxable income as an itemized deduction and sometimes can add up to a significant break on your tax bill.