Itemized deductions occupy an important part in the filing of U.S. returns for the year 2025, when their structure has changed. It is technically defined as: “Itemized deductions are subtractions from a taxpayer’s Adjusted Gross Income (AGI) that reduce the amount of income that is taxed. Most taxpayers have a choice of taking a standard deduction or itemizing deductions. Taxpayers should use the type of deduction that results in the lowest tax.”
How does one reflect on the standard deduction amount?
The amounts are:
• Single or Married Filing Separately — $15,750
• Married Filing Jointly or Qualifying Surviving Spouse — $31,500
• Head of Household — $23,625
If you are intent upon itemizing, when will you do it?
Taxpayers who have a standard deduction of zero should itemize their deductions.
Taxpayers who normally fall within this category are:
• Married, filing a separate return, and their spouse is itemizing
• Filing a return for a short tax year due to a change in the annual accounting period
• Considered to be non-resident aliens or dual-status aliens during the year (and not married to a U.S. citizen or resident at the end of the tax year)
How do I decide if a taxpayer should itemize deductions?
In general, taxpayers who have deductible mortgage interest or a very large amount of unreimbursed medical/dental expenses compared to their income would benefit from itemizing their deductions.
Itemized deductions include amounts paid for qualified:
• Medical and dental expenses
• Certain taxes paid
• Home mortgage interest
• Gifts to charity
• Casualty and theft losses (only losses derived from federally declared disaster areas are allowed)
• Certain miscellaneous deductions
1. Medical and Dental Expenses
Unreimbursed medical and dental expenses that exceed 7.5% of the taxpayer’s AGI are deductible; they are reported on lines 1 through 4 of Schedule A.
Qualified medical and dental expenses are those paid during the tax year for the taxpayer, spouse, dependents, and certain non-dependents.
Let us get more information from IRS instructions about examples of medical and dental payments that you can include for calculation.
You can include:
- Insurance premiums for medical and dental care, including premiums for qualified long-term care insurance contracts as defined in Pub. 502. But see “Limit on long-term care premiums you can deduct,” later.
Kindly reduce the insurance premiums by any self-employed health insurance deduction you claimed on Schedule 1 (Form 1040), line 17. You can’t include insurance premiums paid by making a pretax reduction to your employee compensation because these amounts are already excluded from your income by not being included in box 1 of your Form(s) W-2.
• Prescription medicines or insulin
• Acupuncturists, chiropractors, dentists, eye doctors, medical doctors, occupational therapists, osteopathic doctors, physical therapists, podiatrists, psychiatrists, psychoanalysts (medical care only), and psychologists
• Medical examinations, X-ray and laboratory services, and insulin treatments ordered by your doctor
• Diagnostic tests, such as a full-body scan, pregnancy test, or blood sugar test kit
• Nursing help (including your share of the employment taxes paid). If you paid someone to do both nursing and housework, you can deduct only the cost of the nursing help
• Hospital care (including meals and lodging), clinic costs, and lab fees
• Qualified long-term care services (see Pub. 502)
• The supplemental part of Medicare insurance (Medicare Part B)
• The premiums you pay for Medicare Part D insurance
Limit on long-term care premiums you can include:
The amount you can include for qualified long-term care insurance contracts (as defined in Pub. 502) depends on the age at the end of 2025 of the person for whom the premiums were paid.
See the following chart for details.
| Age at End of 2025 | Maximum Amount |
| 40 or under | $480 |
| 41–50 | $900 |
| 51–60 | $1,800 |
| 61–70 | $4,810 |
| 71 or older | $6,020 |
2. Taxes You Paid
Deductible taxes are reported on Schedule A and include the following:
• State and local income taxes or state and local general sales taxes
• State or local real estate taxes
• Personal property taxes
These taxes are subject to an aggregate limitation of $40,000 ($20,000 if Married Filing Separately).
Note: Taxes paid as part of a trade or business or for the production of income are not subject to the aggregate $10,000 limit.
3. Interest You Paid
Deductible interest is reported on Schedule A.
Generally, the taxpayer receives Form 1098, Mortgage Interest Statement, which shows the total amount of interest paid.
What is the condition?
The loan proceeds must be used to buy, build, or improve the home, and the interest must be paid by the taxpayer during the tax year.
Only taxpayers who are legally liable for the debt can deduct the interest. Only points paid as a form of interest (for the use of money) can be deducted on Schedule A.
Generally, points must be spread over the life of the mortgage. However, if the loan is used to buy or build a taxpayer’s main home, and certain other conditions are met, the taxpayer may be able to deduct the entire amount in the year paid.
State and local tax (SALT) deduction limit increased:
The overall limit on the deduction for state and local income, sales, and property taxes has increased to $40,000 ($20,000 if Married Filing Separately). The overall limit is reduced if modified adjusted gross income exceeds $500,000 ($250,000 if Married Filing Separately) but will not be reduced below $10,000 ($5,000 if Married Filing Separately).
Recent legislation further provided four new deductions that take effect beginning in 2025. These new deductions are no tax on tips, no tax on overtime, no tax on car loan interest, and the enhanced deduction for seniors. If you are eligible, you can claim these deductions even if you itemize on Schedule A. If eligible, these deductions must be claimed on Schedule 1-A, not on Schedule A.
Investment Interest
Investment interest is interest paid on money you borrowed that is allocable to property held for investment. It does not include any interest allocable to passive activities or to securities that generate tax-exempt income. Complete and attach Form 4952 to compute your deduction. Certain conditions apply for non-inclusion of this form.
4. Gifts to Charity
Qualified charitable contributions are reported on Schedule A.
The contributions to qualifying organizations that taxpayers can deduct include:
• Monetary donations
• Dues, fees, and assessments paid to qualified organizations above the value of benefits received
• Fair market value of used clothing and furniture at the time of donation
• Cost and upkeep of uniforms that have no general use but must be worn while performing donated services for a charitable organization
• Unreimbursed transportation expenses or out-of-pocket expenses that relate directly to the services the taxpayer provided
• Part of a contribution above the fair market value for items received, such as merchandise and tickets to charity balls or sporting events
What are some of the qualifying institutions?
• Organizations that operate exclusively for religious, charitable, educational, scientific, or literary purposes
• Organizations that work to prevent cruelty to children or animals
• Organizations that foster national or international amateur sports competition if they do not provide athletic facilities or equipment
• War veterans’ organizations
• Certain nonprofit cemetery companies or corporations
What records should the taxpayer keep for charitable contributions?
Taxpayers must keep records to verify the cash and non-cash contributions they make during the year. Taxpayers cannot deduct a cash contribution, regardless of the amount, unless one of the following records is kept:
• A credit card statement or a bank record containing the name of the charity, the date, and the amount
• A written communication from the charity containing the name of the charity, the date of the contribution, and the amount
For monetary contributions of $250 or more, taxpayers can claim a deduction only if they have a statement from the charitable organization showing the amount contributed and whether any goods or services were provided in return. During the interview, review documentation requirements and confirm that appropriate records are available.
Forms Used for Itemized Deductions
Schedule A (Form 1040): Itemized Deductions (Attach to Form 1040 or 1040-SR)
Medical and Dental Expenses — Serial numbers 1–4
Taxes You Paid — Serial numbers 5–7
Interest You Paid — Serial numbers 8–10
Gifts to Charity — Serial numbers 11–14
Casualty and Theft Losses — Serial number 15
Other Itemized Deductions — Serial number 16
Total Itemized Deductions — Serial numbers 17–18
Schedule 1-A: Itemized Deductions (New Form Introduced)
Part I — Modified Adjusted Gross Income (MAGI) Amount
Part II — No Tax on Tips
Part III — No Tax on Overtime
Part IV — No Tax on Car Loan Interest
Part V — Enhanced Deduction for Seniors
Part VI — Total Additional Deductions
Itemized Deductions – Form 1040-NR
Includes:
• Taxes You Paid
• Gifts to U.S. Charities
• Casualty and Theft Losses from federally declared disasters
• Other Itemized Deductions
Who should file Form 1040-NR?
You must file the form under one of the following conditions:
- You were a non-resident alien engaged in a trade or business in the United States during 2025.
- You were a non-resident alien not engaged in a trade or business in the United States during 2025 and received U.S.-source income not fully subject to withholding.
- You owe special taxes, including alternative minimum tax, additional tax on a qualified plan or IRA, household employment taxes, or Social Security and Medicare tax on unreported tips or wages.
Conclusion
We started the discussion with the necessity of filing forms when taxpayers have a choice of taking a standard deduction or itemizing deductions. Taxpayers should use the type of deduction that results in the lowest tax. Most taxpayers use the standard deduction to pay less tax.
Detailed discussion on Schedule A (Form 1040) and Form 1040-NR has been provided to assist taxpayers. It is pertinent to note that charitable contributions attract the attention of IRS authorities, as this is one of the most commonly misused provisions for claiming deductions.
Advisory
Kindly seek advice or consultation from an active CPA or advocate for filing tax forms. Although efforts have been made to adhere to official instructions, this does not constitute expert advice. Professionals use the latest tax software to provide accurate consultation, advice, and filing of returns.
Reference
IRS Website
2025 Instructions for Form 1040-NR, U.S. Non-Resident Alien Income Tax Return
Instructions for Schedule A (Form 1040) (2025)
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