2007 Instructions for Schedules A & B (Form 1040) (2006)

IRS Resources

Instructions for Schedule A, Itemized Deductions

Table of Contents

Introduction

Use Schedule A (Form 1040) to figure your itemized deductions. In most cases, your federal income tax will be less if you take the larger of your itemized deductions or your standard deduction.

If you itemize, you can deduct a part of your medical and dental expenses and unreimbursed employee business expenses, and amounts you paid for certain taxes, interest, contributions, and miscellaneous expenses. You can also deduct certain casualty and theft losses.

If you and your spouse paid expenses jointly and are filing separate returns for 2007, see Pub. 504 to figure the portion of joint expenses that you can claim as itemized deductions.

Do not include on Schedule A items deducted elsewhere, such as on Form 1040 or Schedule C, C-EZ, E, or F.

What's New

Standard mileage rates. The 2007 rate for use of your vehicle to get medical care is 20 cents a mile. The special rate for charitable use of your vehicle to provide relief related to Hurricane Katrina has expired.

State and local general sales taxes. The option to deduct state and local general sales taxes instead of state and local income taxes was extended through 2007. See the instructions for line 5 that begin on page A-2.

Mortgage insurance premiums. Mortgage insurance premiums for mortgage insurance contracts issued after December 31, 2006, may be deductible on new line 13. See the instructions for line 13 on page A-7.

New recordkeeping requirements for contributions of money. For charitable contributions made in cash, regardless of the amount, you must maintain as a record of the contribution a bank record (such as a canceled check) or a written record from the charity. The written record must include the name of the charity, date, and amount of the contribution. See Gifts to Charity that begins on page A-7.

Medical and Dental Expenses

You can deduct only the part of your medical and dental expenses that exceeds 7.5% of the amount on Form 1040, line 38.

Pub. 502 discusses the types of expenses that you can and cannot deduct. It also explains when you can deduct capital expenses and special care expenses for disabled persons.

If you received a distribution from a health savings account or a medical savings account in 2007, see Pub. 969 to figure your deduction.

Examples of Medical and Dental Payments You Can Deduct

To the extent you were not reimbursed, you can deduct what you paid for:

Insurance premiums for medical and dental care, including premiums for qualified long-term care contracts as defined in Pub. 502. But see Limit on long-term care premiums you can deduct on page A-2. Reduce the insurance premiums by any self-employed health insurance deduction you claimed on Form 1040, line 29. You cannot deduct insurance premiums paid with pretax dollars because the premiums are not included in box 1 of your Form(s) W-2. If you are a retired public safety officer, you cannot deduct any premiums you paid to the extent they were paid for with a tax-free distribution from your retirement plan.

If, during 2007, you were an eligible trade adjustment assistance (TAA) recipient, alternative TAA recipient, or Pension Benefit Guaranty Corporation pension recipient, you must reduce your insurance premiums by any amounts used to figure the health coverage tax credit. See the instructions for line 1 on page A-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, insulin treatment, and whirlpool baths your doctor ordered.
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 B).
The premiums you pay for Medicare Part D insurance.
A program to stop smoking and for prescription medicines to alleviate nicotine withdrawal.
A weight-loss program as treatment for a specific disease (including obesity) diagnosed by a doctor.
Medical treatment at a center for drug or alcohol addiction.
Medical aids such as eyeglasses, contact lenses, hearing aids, braces, crutches, wheelchairs, and guide dogs, including the cost of maintaining them.
Surgery to improve defective vision, such as laser eye surgery or radial keratotomy.
Lodging expenses (but not meals) while away from home to receive medical care in a hospital or a medical care facility related to a hospital, provided there was no significant element of personal pleasure, recreation, or vacation in the travel. Do not deduct more than $50 a night for each eligible person.
Ambulance service and other travel costs to get medical care. If you used your own car, you can claim what you spent for gas and oil to go to and from the place you received the care; or you can claim 20 cents a mile. Add parking and tolls to the amount you claim under either method.

Note.

Certain medical expenses paid out of a deceased taxpayer's estate can be claimed on the deceased taxpayer's final return. See Pub. 502 for details.

Limit on long-term care premiums you can deduct. The amount you can deduct for qualified long-term care contracts (as defined in Pub. 502) depends on the age, at the end of 2007, of the person for whom the premiums were paid. See the chart below for details.

IF the person was, at the end of 2007, age . . .	THEN the most you can deduct is . . .
40 or under	$ 290
41-50	$ 550
51-60	$ 1,110
61-70	$ 2,950
71 or older	$ 3,680

Examples of Medical and Dental Payments You Cannot Deduct

If you were age 65 or older but not entitled to social security benefits, you can deduct premiums you voluntarily paid for Medicare A coverage.

The cost of diet food.
Cosmetic surgery unless it was necessary to improve a deformity related to a congenital abnormality, an injury from an accident or trauma, or a disfiguring disease.
Life insurance or income protection policies.
The Medicare tax on your wages and tips or the Medicare tax paid as part of the self-employment tax or household employment taxes.
Nursing care for a healthy baby. But you may be able to take a credit for the amount you paid. See the instructions for Form 1040, line 47.
Illegal operations or drugs.
Imported drugs not approved by the U.S. Food and Drug Administration (FDA). This includes foreign-made versions of U.S.-approved drugs manufactured without FDA approval.
Nonprescription medicines (including nicotine gum and certain nicotine patches).
Travel your doctor told you to take for rest or a change.
Funeral, burial, or cremation costs.

Line 1

Medical and Dental Expenses

Enter the total of your medical and dental expenses (see page A-1), after you reduce these expenses by any payments received from insurance or other sources. See Reimbursements below.

Do not forget to include insurance premiums you paid for medical and dental care. But if you claimed the self-employed health insurance deduction on Form 1040, line 29, reduce the premiums by the amount on line 29.

Note.

If, during 2007, you were an eligible trade adjustment assistance (TAA) recipient, alternative TAA recipient, or Pension Benefit Guaranty Corporation pension recipient, you must complete Form 8885 before completing Schedule A, line 1. When figuring the amount of insurance premiums you can deduct on Schedule A, do not include:

Any amounts you included on Form 8885, line 4,
Any qualified health insurance premiums you paid to “U.S. Treasury —HCTC,” or
Any health coverage tax credit advance payments shown in box 1 of Form 1099-H.

Whose medical and dental expenses can you include? You can include medical and dental bills you paid for:

Yourself and your spouse.
All dependents you claim on your return.
Your child whom you do not claim as a dependent because of the rules for children of divorced or separated parents.
Any person you could have claimed as a dependent on your return except that person received $3,400 or more of gross income or filed a joint return.

Any person you could have claimed as a dependent except that you, or your spouse if filing jointly, can be claimed as a dependent on someone else's 2007 return.

Example.

You provided over half of your mother's support but cannot claim her as a dependent because she received wages of $3,400 in 2007. You can include on line 1 any medical and dental expenses you paid in 2007 for your mother.

Reimbursements. If your insurance company paid the provider directly for part of your expenses, and you paid only the amount that remained, include on line 1 only the amount you paid. If you received a reimbursement in 2007 for medical or dental expenses you paid in 2007, reduce your 2007 expenses by this amount. If you received a reimbursement in 2007 for prior year medical or dental expenses, do not reduce your 2007 expenses by this amount. But if you deducted the expenses in the earlier year and the deduction reduced your tax, you must include the reimbursement in income on Form 1040, line 21. See Pub. 502 for details on how to figure the amount to include.

Cafeteria plans. Do not include on line 1 insurance premiums paid by an employer-sponsored health insurance plan (cafeteria plan) unless the premiums are included in box 1 of your Form(s) W-2. Also, do not include any other medical and dental expenses paid by the plan unless the amount paid is included in box 1 of your Form(s) W-2.

Taxes You Paid

Taxes You Cannot Deduct

Federal income and excise taxes.
Social security, Medicare, federal unemployment (FUTA), and railroad retirement (RRTA) taxes.
Customs duties.
Federal estate and gift taxes. But see the instructions for line 28 on page A-10.
Certain state and local taxes, including: tax on gasoline, car inspection fees, assessments for sidewalks or other improvements to your property, tax you paid for someone else, and license fees (marriage, driver's, dog, etc.).

Line 5

You can elect to deduct state and local general sales taxes instead of state and local income taxes. You cannot deduct both.

State and Local Income Taxes

If you deduct state and local income taxes, check box a on line 5. Include on this line the state and local income taxes listed below.

State and local income taxes withheld from your salary during 2007. Your Form(s) W-2 will show these amounts. Forms W-2G, 1099-G, 1099-R, and 1099-MISC may also show state and local income taxes withheld.
State and local income taxes paid in 2007 for a prior year, such as taxes paid with your 2006 state or local income tax return. Do not include penalties or interest.
State and local estimated tax payments made during 2007, including any part of a prior year refund that you chose to have credited to your 2007 state or local income taxes.
Mandatory contributions you made to the California, New Jersey, or New York Nonoccupational Disability Benefit Fund, Rhode Island Temporary Disability Benefit Fund, or Washington State Supplemental Workmen's Compensation Fund.
Mandatory contributions to the Alaska, New Jersey, or Pennsylvania state unemployment fund.

Do not reduce your deduction by any:

State or local income tax refund or credit you expect to receive for 2007, or
Refund of, or credit for, prior year state and local income taxes you actually received in 2007. Instead, see the instructions for Form 1040, line 10.

State and Local General Sales Taxes

If you elect to deduct state and local general sales taxes, you must check box b on line 5. To figure your deduction, you can use either your actual expenses or the optional sales tax tables.

Actual Expenses

Generally, you can deduct the actual state and local general sales taxes (including compensating use taxes) you paid in 2007 if the tax rate was the same as the general sales tax rate. However, sales taxes on food, clothing, medical supplies, and motor vehicles are deductible as a general sales tax even if the tax rate was less than the general sales tax rate. If you paid sales tax on a motor vehicle at a rate higher than the general sales tax rate, you can deduct only the amount of tax that you would have paid at the general sales tax rate on that vehicle. Motor vehicles include cars, motorcycles, motor homes, recreational vehicles, sport utility vehicles, trucks, vans, and off-road vehicles. Also include any state and local general sales taxes paid for a leased motor vehicle. Do not include sales taxes paid on items used in your trade or business.

You must keep your actual receipts showing general sales taxes paid to use this method.

Refund of general sales taxes. If you received a refund of state or local general sales taxes in 2007 for amounts paid in 2007, reduce your actual 2007 state and local general sales taxes by this amount. If you received a refund of state or local general sales taxes in 2007 for prior year purchases, do not reduce your 2007 state and local general sales taxes by this amount. But if you deducted your actual state and local general sales taxes in the earlier year and the deduction reduced your tax, you may have to include the refund in income on Form 1040, line 21. See Recoveries in Pub. 525 for details.

Optional Sales Tax Tables

Instead of using your actual expenses, you can use the tables on pages A-11 through A-13 to figure your state and local general sales tax deduction. You may also be able to add the state and local general sales taxes paid on certain specified items.

To figure your state and local general sales tax deduction using the tables, complete the worksheet on page A-4 or use the 2007 Sales Tax Deduction Calculator on the IRS website. To use the 2007 Sales Tax Deduction Calculator, go to www.irs.gov and enter “Sales tax deduction calculator” in the search box.

If your filing status is married filing separately, both you and your spouse elect to deduct sales taxes, and your spouse elects to use the optional sales tax tables, you also must use the tables to figure your state and local general sales tax deduction.

State and Local General Sales Tax Deduction Worksheet—Line 5b (See the Instructions for Line 5b Worksheet that begin on page A-3.)

Before you begin:

See the instructions for line 1 on page A-3 if:

You lived in more than one state during 2007, or
You had any nontaxable income in 2007.


1.	Enter your state general sales taxes from the applicable table on page A-11 or A-12 (see page A-3 of the instructions)				1.	$
	Next. If, for all of 2007, you lived only in Connecticut, the District of Columbia, Hawaii, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, Mississippi, New Jersey, Rhode Island, Virginia, or West Virginia, skip lines 2 through 5, enter -0- on line 6, and go to line 7. Otherwise, go to line 2.
2.	Did you live in Alaska, Arizona, Arkansas (Texarkana only), California (Los Angeles County only), Colorado, Georgia, Illinois, Louisiana, New York State, or North Carolina in 2007?
		No. Enter -0-
		Yes. Enter your local general sales taxes from the applicable table on page A-13 (see page A-3 of the instructions)	2.	$
3.	Did your locality impose a local general sales tax in 2007? Residents of California, Nevada, and Texarkana, Arkansas, see page A-3 of the instructions.
		No. Skip lines 3 through 5, enter -0- on line 6, and go to line 7.
		Yes. Enter your local general sales tax rate, but omit the percentage sign. For example, if your local general sales tax rate was 2.5%, enter 2.5. If your local general sales tax rate changed or you lived in more than one locality in the same state during 2007, see page A-3 of the instructions. (If you do not know your local general sales tax rate, contact your local government.)	3.	.
4.	Did you enter -0- on line 2 above?
		No. Skip lines 4 and 5 and go to line 6.
		Yes. Enter your state general sales tax rate (shown in the table heading for your state), but omit the percentage sign. For example, if your state general sales tax rate is 6%, enter 6.0	4.	.
5.	Divide line 3 by line 4. Enter the result as a decimal (rounded to at least three places)		5.	.
6.	Did you enter -0- on line 2 above?
		No. Multiply line 2 by line 3			6.	$
		Yes. Multiply line 1 by line 5. If you lived in more than one locality in the same state during 2007, see the instructions above
7.	Enter your state and local general sales taxes paid on specified items, if any (see page A-5 of the instructions)				7.	$
8.	Deduction for general sales taxes. Add lines 1, 6, and 7. Enter the result here and the total from all your state and local general sales tax deduction worksheets, if you completed more than one, on Schedule A, line 5. Be sure to check box b on that line				8.	$

Instructions for Line 5b Worksheet

Line 1. If you lived in the same state for all of 2007, enter the applicable amount, based on your 2007 income and exemptions, from the optional state sales tax table for your state on page A-11 or A-12. Read down the “At least-But less than” columns for your state and find the line that includes your 2007 income. If married filing separately, do not include your spouse's income. Your 2007 income is the amount shown on your Form 1040, line 38, plus any nontaxable items, such as the following.

Tax-exempt interest.
Veterans' benefits.
Nontaxable combat pay.
Workers' compensation.
Nontaxable part of social security and railroad retirement benefits.
Nontaxable part of IRA, pension, or annuity distributions. Do not include rollovers.
Public assistance payments.

The exemptions column refers to the number of exemptions claimed on Form 1040, line 6d.

What if you lived in more than one state? If you lived in more than one state during 2007, look up the table amount for each state using the above rules. If there is no table for your state, the table amount is considered to be zero. Multiply the table amount for each state you lived in by a fraction. The numerator of the fraction is the number of days you lived in the state during 2007 and the denominator is the total number of days in the year (365). Enter the total of the prorated table amounts for each state on line 1. However, if you also lived in a locality during 2007 that imposed a local general sales tax, do not enter the total on line 1. Instead, complete a separate worksheet for each state you lived in and enter the prorated amount for that state on line 1.

Example.

You lived in State A from January 1 through August 31, 2007 (243 days), and in State B from September 1 through December 31, 2007 (122 days). The table amount for State A is $500. The table amount for State B is $400. You would figure your state general sales tax as follows.

State A:	$500 x 243/365 =	$333
State B:	$400 x 122/365 =	134
Total	=	$467

If none of the localities in which you lived during 2007 imposed a local general sales tax, enter $467 on line 1 of your worksheet. Otherwise, complete a separate worksheet for State A and State B. Enter $333 on line 1 of the State A worksheet and $134 on line 1 of the State B worksheet.

Line 2. If you checked the “No” box, enter -0- on line 2, and go to line 3. If you checked the “Yes” box and lived in the same locality for all of 2007, enter the applicable amount, based on your 2007 income and exemptions, from the optional local sales tax table for your locality on page A-13. Read down the “At least-But less than” columns for your locality and find the line that includes your 2007 income. See the line 1 instructions on this page to figure your 2007 income. The exemptions column refers to the number of exemptions claimed on Form 1040, line 6d.

What if you lived in more than one locality? If you lived in more than one locality during 2007, look up the table amount for each locality using the above rules. If there is no table for your locality, the table amount is considered to be zero. Multiply the table amount for each locality you lived in by a fraction. The numerator of the fraction is the number of days you lived in the locality during 2007 and the denominator is the total number of days in the year (365). If you lived in more than one locality in the same state and the local general sales tax rate was the same for each locality, enter the total of the prorated table amounts for each locality in that state on line 2. Otherwise, complete a separate worksheet for lines 2 through 6 for each locality and enter each prorated table amount on line 2 of the applicable worksheet.

Example.

You lived in Locality 1 from January 1 through August 31, 2007 (243 days), and in Locality 2 from September 1 through December 31, 2007 (122 days). The table amount for Locality 1 is $100. The table amount for Locality 2 is $150. You would figure the amount to enter on line 2 as follows. Note that this amount may not equal your local sales tax deduction, which is figured on line 6 of the worksheet.

Locality 1:	$100 x 243/365 =	$67
Locality 2:	$150 x 122/365 =	50
Total	=	$117

Line 3. If you lived in California, check the “No” box if your combined state and local general sales tax rate is 7.25%. Otherwise, check the “Yes” box and include on line 3 only the part of the combined rate that is more than 7.25%.

If you lived in Nevada, check the “No” box if your combined state and local general sales tax rate is 6.5%. Otherwise, check the “Yes” box and include on line 3 only the part of the combined rate that is more than 6.5%.

If you lived in Texarkana, Arkansas, check the “Yes” box and enter “4.0” on line 3. Your local general sales tax rate of 4.0% includes the additional 2.5% sales tax rate for Texarkana and the 1.5% sales tax rate for Miller County.

What if your local general sales tax rate changed during 2007? If you checked the “Yes” box and your local general sales tax rate changed during 2007, figure the rate to enter on line 3 as follows. Multiply each tax rate for the period it was in effect by a fraction. The numerator of the fraction is the number of days the rate was in effect during 2007 and the denominator is the total number of days in the year (365). Enter the total of the prorated tax rates on line 3.

Example.

Locality 1 imposed a 1% local general sales tax from January 1 through September 30, 2007 (273 days). The rate increased to 1.75% for the period from October 1 through December 31, 2007 (92 days). You would enter “1.189” on line 3, figured as follows.

January 1 - September 30:	1.00 x 273/365 =	0.748
October 1 - December 31:	1.75 x 92/365 =	0.441
Total	=	1.189

What if you lived in more than one locality in the same state during 2007? Complete a separate worksheet for lines 2 through 6 for each locality in your state if you lived in more than one locality in the same state during 2007 and either of the following applies.

Each locality did not have the same local general sales tax rate.
You lived in Texarkana, AR, or Los Angeles County, CA.

To figure the amount to enter on line 3 of the worksheet for each locality in which you lived (except a locality for which you used the table on page A-13 to figure your local general sales tax deduction), multiply the local general sales tax rate by a fraction. The numerator of the fraction is the number of days you lived in the locality during 2007 and the denominator is the total number of days in the year (365).

Example.

You lived in Locality 1 from January 1 through August 31, 2007 (243 days), and in Locality 2 from September 1 through December 31, 2007 (122 days). The local general sales tax rate for Locality 1 is 1%. The rate for Locality 2 is 1.75%. You would enter “0.666” on line 3 for the Locality 1 worksheet and “0.585” for the Locality 2 worksheet, figured as follows.

Locality 1:	1.00 x 243/365 =		0.666
Locality 2:	1.75 x 122/365 =		0.585

Line 6. If you lived in more than one locality in the same state during 2007, you should have completed line 1 only on the first worksheet for that state and separate worksheets for lines 2 through 6 for any other locality within that state in which you lived during 2007. If you checked the “Yes” box on line 6 of any of those worksheets, multiply line 5 of that worksheet by the amount that you entered on line 1 for that state on the first worksheet.

Line 7. Enter on line 7 any state and local general sales taxes paid on the following specified items. If you are completing more than one worksheet, include the total for line 7 on only one of the worksheets.

A motor vehicle (including a car, motorcycle, motor home, recreational vehicle, sport utility vehicle, truck, van, and off-road vehicle). Also include any state and local general sales taxes paid for a leased motor vehicle. If the state sales tax rate on these items is higher than the general sales tax rate, only include the amount of tax you would have paid at the general sales tax rate.
An aircraft or boat, if the tax rate was the same as the general sales tax rate.
A home (including a mobile home or prefabricated home) or substantial addition to or major renovation of a home, but only if the tax rate was the same as the general sales tax rate and any of the following applies.
1. Your state or locality imposes a general sales tax directly on the sale of a home or on the cost of a substantial addition or major renovation.
2. You purchased the materials to build a home or substantial addition or to perform a major renovation and paid the sales tax directly.
3. Under your state law, your contractor is considered your agent in the construction of the home or substantial addition or the performance of a major renovation. The contract must state that the contractor is authorized to act in your name and must follow your directions on construction decisions. In this case, you will be considered to have purchased any items subject to a sales tax and to have paid the sales tax directly.

Do not include sales taxes paid on items used in your trade or business. If you received a refund of state or local general sales taxes in 2007, see Refund of general sales taxes on page A-3.

Line 6

Real Estate Taxes

Include taxes (state, local, or foreign) you paid on real estate you own that was not used for business, but only if the taxes are based on the assessed value of the property. Also, the assessment must be made uniformly on property throughout the community, and the proceeds must be used for general community or governmental purposes. Pub. 530 explains the deductions homeowners can take.

Do not include the following amounts on line 6.

Itemized charges for services to specific property or persons (for example, a $20 monthly charge per house for trash collection, a $5 charge for every 1,000 gallons of water consumed, or a flat charge for mowing a lawn that had grown higher than permitted under a local ordinance).
Charges for improvements that tend to increase the value of your property (for example, an assessment to build a new sidewalk). The cost of a property improvement is added to the basis of the property. However, a charge is deductible if it is used only to maintain an existing public facility in service (for example, a charge to repair an existing sidewalk, and any interest included in that charge).

If your mortgage payments include your real estate taxes, you can deduct only the amount the mortgage company actually paid to the taxing authority in 2007.

If you sold your home in 2007, any real estate tax charged to the buyer should be shown on your settlement statement and in box 5 of any Form 1099-S you received. This amount is considered a refund of real estate taxes. See Refunds and rebates below. Any real estate taxes you paid at closing should be shown on your settlement statement.

Refunds and rebates. If you received a refund or rebate in 2007 of real estate taxes you paid in 2007, reduce your deduction by the amount of the refund or rebate. If you received a refund or rebate in 2007 of real estate taxes you paid in an earlier year, do not reduce your deduction by this amount. Instead, you must include the refund or rebate in income on Form 1040, line 21, if you deducted the real estate taxes in the earlier year and the deduction reduced your tax. See Recoveries in Pub. 525 for details on how to figure the amount to include in income.

Line 7

Personal Property Taxes

Enter the state and local personal property taxes you paid, but only if the taxes were based on value alone and were imposed on a yearly basis.

Example.

You paid a yearly fee for the registration of your car. Part of the fee was based on the car's value and part was based on its weight. You can deduct only the part of the fee that was based on the car's value.

Line 8

Other Taxes

If you had any deductible tax not listed on line 5, 6, or 7, list the type and amount of tax. Enter only one total on line 8. Include on this line income tax you paid to a foreign country or U.S. possession.