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Since most people won't itemize they can tune out this next section but if you're one of the 25% of people who do itemize here's the skinny on what you can or can't deduct on Schedule A first deductible item is for medical expenses when I first started to do my taxes as a youngster I thought I'd be smart and save my receipts for all my routine medical and dental checkups I figured I'd clean up by deducting these bills' boy was I wrong the truth is unless you've got one foot in the grave and don't have insurance you probably won't be able to take advantage of this deduction the reason for this is that the medical deduction only helps if your reimbursed medical expenses total more than 7.5 percent of your AGI still if you have a low AGI and high medical bills you might want to look into this deduction note that medical insurance payments and payments to an HMO are potentially big payments that qualify for this deduction also long-term care insurance premiums became deductible medical expenses starting in 1997 next comes state and local taxes you also can deduct foreign taxes on Schedule A bit you're better off getting a credit which I'll explain later when it comes to state and local taxes there are no real strings attached just total up the state and local income tax as you paid and the property taxes you paid there's no AGI threshold to worry about there are a few caveats however the first is that sales taxes are no longer deductible another is that assessments by a local government for services like garbage removal aren't deductible either finally if you itemize and deduct state income taxes this year and then receive a state income tax refund next year you'll have to report that refund as taxable income next year and be careful here the IRS and state governments exchange tax information and if you don't include the reef and in next year's federal return you'll probably get an IRS letter the next deductible item is interest the main items here are mortgage and investment interest you no longer can deduct personal interest for things like credit cards or automobiles used for personal reasons you can deduct the interest you pay to buy up to two homes mortgages the total up to $1,000,000 and the interest on up to $100,000 in home equity financing are deductible the interest you paid is reported to you on form 1098 which your lender should send to you, it should go without saying that if your deduction is different from the amount on the form 1098 you'll be asking for an IRS letter if you've just purchased a house you can deduct the entire amount of the points or prepaid interest that you made however if you paid points when you refinanced a mortgage you can't deduct the points immediately you'll have to amortize or spread out the points over the life of the loan note that the IRS says that a home is defined as a place that has sleeping cooking and bathing facilities so even a houseboat or motor home may qualify as a first or second house if you...
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