 Most of this information comes from the Schedule A Tax Year 2022 instructions you could find at the IRS website, irs.gov, irs.gov. Looking at the income tax formula, we're focused on the itemized deductions, remembering first half of the income tax formula is in essence an income statement where we have income minus the equivalent of the expenses being the deductions gets to the equivalent of net income. Not being taxable income, everything's flipped on its head for taxes. We want taxable income, in other words, as low as possible as opposed to normally when we want income as high as possible. In prior sections we talked about what needs to be included in income. We talked about what can be called the above the line deductions as opposed to the below the line deductions or the adjustments to income to get to the subtotal of the adjusted gross income and important subtotal when used to do calculations for phaseouts of say deductions and credits as income levels rise. Now we're on the below the line deductions, greater of the standard or itemized deductions focusing specifically on the itemized deductions which we would only take, we can only get an advantage from if they added up to some amount greater than the standard deduction. Coming up page one of the form 1040 we're down here on line number 12 standard deduction or itemized deduction whichever is larger remembering we would only be attaching the schedule A taking the itemized deduction if the amount was above the standard of 12,950 or 25,900 single verses married respectively. This is the schedule A. Now note when we think about the schedule A the main thing that pushes people over from taking the standard deduction to the itemized deductions is the home ownership because that will typically result in a loan. The loan interest is the big deduction component followed by the property taxes on the home. Once that has been cleared then we can look more in detail about other itemized deductions which on themselves or in and of themselves would not have pushed people over from the standard to itemized deductions but once cleared once we have cleared that itemized deduction threshold then they help they can help a lot more readily such as the gifts to charity. So now we're talking about charitable type of contributions. Now note in prior years what happened is they increased the standard deduction a few years ago and when that happens it actually makes the schedule A a little bit less relevant so some of these favorite deductions these are some of the most popular deductions that are on the schedule A were made a little bit less relevant when they increased the standard deduction which was kind of the point because they were trying to support accounting instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course each course then organized in a logical reasonable fashion making it much more easy to find what you need then can be done on a YouTube page. We also include added resources such as excel practice problems PDF files and more like QuickBooks backup files when applicable so once again click the link below for a free month membership to our website and all the content on it. And usually the people that are benefiting from the itemization the itemized deductions are more wealthy individuals but you can see how people like their deductions for whatever reason they kind of seep in we can see what will happen in the future in terms of if you make the itemized deductions less relevant then in future law are they going to try to reverse that lowering the standard deduction or reverse it through increasing inflation so the standard deduction is not as relevant in terms of a dollar amount because of inflation decreasing the value of the dollar or you can imagine some of the stuff from the itemized deductions they creep it over into some other area such as with the charitable deductions they put a little they put a capacity to deduct some charitable contributions on the first page of the 1040 now that basically got reversed so that when you think about charitable contributions you're generally thinking the Schedule A which is what we're talking about here and if you're deducting them on the Schedule A you're only going to get a benefit from it if you're basically clearing the standard deduction because otherwise you're not going to get a tax benefit now obviously when giving to charity the only reason to give the charity shouldn't you would think B to get a tax benefit but you can also see why the tax code would try to incentivize you know gifts to charity so this is another one of those instances like many of them on the itemized deduction where it kind of deviates from the standard rule what's the standard rule if you have an income tax system your tax you allow people to deduct the expenses deductions which they needed to consume in order to generate the revenue so you tax people on net income as opposed to gross income which we can clearly see on say for example a Schedule C where you have an income statement income minus the expenses those deductions you needed to expand in order to generate the income gets to the net income so we tax people on the net income not the gross income now when we talk about other types of income like a w2 income then the government would like most people to have w2 income because then they can kind of force the employee error to take the responsibility for a lot of it a lot of the reporting and whatnot and they can we can simplify the tax code by saying we're not going to give you any normal kind of business deductions because we assume your employer is going to take care of that stuff and therefore most of the deductions we kind of think about are these Schedule A deductions and they're strange from an income tax system meaning they're not a natural kind of deduction because they're not necessary in order to generate revenue they're the government trying to incentivize us in somewhere or form trying to change our behavior as clearly as the case with the charitable contribution so you can make the case as to whether or not they should be deductible or not and how much that might benefit society or whatnot but it's clearly again it's kind of outside of the normal classification of a deduction and it's generally on the itemized deductions okay that said we've got the standard deductions note that you have to clear the standard deductions before you'll be able to deduct the charitable contributions so in other words if someone is nowhere near clearing these standard deductions it might not be worth your time to be collecting all of the charitable contributions that someone made or spending all your time during the year trying to try to make sure that you you calculate all the all the gifts that to charity that you make right and because you may not clear I mean if you're only doing that for taxes so but if you are clearing them then it does make sense because you need to have the receipts of who you paid if you're going to be taking the deduction for the charitable contributions so remember that's 12,950 that you would have to clear for single 25,900 for married head of household 19 four and then you've got these deviations and variations if they were over 65 and or blind