Itemizing

If you spent more than the amount that qualifies for the standard deduction, you can itemize certain expenses. These include home mortgage interest, state and local income taxes and real estate taxes, charitable contributions, unreimbursed business expenses that exceed 2% of your AGI, and medical and dental expenses that exceed 7.5% of your AGI and aren’t reimbursed by insurance.

If you’re going to itemize, you have to keep careful records of your expenditures so that you can verify your claims if the IRS questions your deductions. Letters from charities acknowledging your gifts are also important, especially if you give generously.

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If your AGI is higher than the limits set by Congress for your filing status, you may not be able to take the full amount of the exemption or deduction you would otherwise be entitled to. In 2006, though, the IRS began to phase out these restrictions.

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