2006 Itemized Deductions
Married Filing Jointly (Phase out)	$139,500
Married Filing Separate (Phase out)	$69,750

Itemized deductions are considered items such as interest, state and local taxes, charitable contributions, and medical deductions, claimed on Schedule A of Form 1040. Itemized deductions are subtracted from adjusted gross income to arrive at taxable income. The amount of itemized deductions is also subject to a reduction when adjusted gross income exceeds certain limits.

If your 2003 adjusted gross income (AGI) exceeds $139,500, itemized deductions other than medical expenses, casualty and theft losses, gambling losses, and investment interest expenses are reduced by 3% of the excess AGI over $139,500. If you are married filing separately, the reduction applies if your AGI exceeds $69,750.

Below are examples of itemized deductions and their explanation:

Interest Expenses: You may deduct interest on qualified home mortgages, points, home equity loans, and interest on loans to carry investments.

Taxes: You may deduct payments of state, local, and foreign real property and income taxes, as well as state and local personal property taxes. You claim your deduction for real estate taxes on the tax return of the year in which you paid the taxes, unless you report on the accrual basis. There is no dollar limitation.

Charitable Contributions: You may deduct donations to religious, charitable, educational, and other philanthropic organizations that have been approved to receive deductible contributions.

Medical Expenses: You may deduct payments of medical expenses for yourself, your spouse, or your dependents. Only expenses in excess of 7.5% of your adjusted gross income are deductible.

Casualty & Theft Losses: You may deduct personal property losses caused by storms, fires, and other natural events and as the result of the theft.

Job Expenses: You may deduct un-reimbursed costs of union dues, job educational courses, work clothes, entertainment, travel, and looking for a new job. These deductions are included as miscellaneous expenses of which only the excess over 2% of your adjusted gross income is deductible. The deductible amount is included in the 3% reduction explained above.

Investment expenses and tax preparation costs: You may deduct investment expenses and other expenses of producing and collecting income, expenses of maintaining income-producing-property, expenses of preparing your tax return or refund claims, and even IRS audits. These exemptions are included as miscellaneous expenses of which only the excess over 2% of the AGI is deductible. The deductible amount is included in the 3% reduction explained above.