EA Part 1 Itemized Deductions: What Still Qualifies After Tax Reform

The Tax Cuts and Jobs Act of 2017 reshaped the itemized deduction landscape dramatically. Because it also nearly doubled the standard deduction, fewer taxpayers itemize — but EA Part 1 still tests the surviving deductions in depth. You need to know not just whether a deduction exists, but the dollar caps, AGI floors, and ordering rules that apply.

Standard Deduction vs. Itemizing

For 2024, the standard deduction amounts are:

• Single / MFS: $14,600
• Head of Household: $21,900
• MFJ / Qualifying Surviving Spouse: $29,200

Additional standard deductions apply for taxpayers who are 65 or older or blind. A taxpayer may not take both the standard deduction and itemized deductions — they choose the larger benefit. One exception: if one spouse itemizes on an MFS return, the other spouse must also itemize (even if itemized deductions are zero).

The SALT Cap: $10,000

The state and local tax (SALT) deduction is limited to $10,000 per return ($5,000 for MFS). This cap covers:

• State and local income taxes (or general sales taxes if the taxpayer elects)
• Foreign income taxes are not included in the SALT deduction — they go on Form 1116 as a foreign tax credit
• State and local real property taxes
• State and local personal property taxes (only if assessed on value, like a car registration fee based on vehicle value)

The $10,000 cap is not indexed for inflation. Watch for exam questions where a taxpayer pays $8,000 in state income tax and $6,000 in property taxes — only $10,000 is deductible, not $14,000.

Mortgage Interest

Acquisition debt interest is deductible on the first $750,000 of mortgage principal for loans taken out after December 15, 2017. For loans originating on or before that date, the prior $1,000,000 limit still applies (grandfathered).

Key rules to know:

Home equity loan interest is deductible only if the proceeds were used to buy, build, or substantially improve the home securing the loan. Using home equity proceeds for personal expenses (paying off credit cards, taking a vacation) produces nondeductible personal interest.

Second homes are included in the $750,000 limit. The combined acquisition debt on a primary and secondary residence cannot exceed $750,000.

Points paid to obtain a mortgage on a principal residence are generally deductible in the year paid if certain conditions are met. Points to refinance must be amortized over the life of the loan.

Charitable Contribution Rules

Cash contributions to qualifying public charities are deductible up to 60% of AGI for regular income tax purposes. Non-cash property contributions are generally limited to 30% of AGI. Contributions of appreciated capital gain property held long-term are limited to 30% of AGI at fair market value (or 50% of AGI if the taxpayer elects to use basis instead of FMV).

Documentation requirements:

• Cash donations under $250: a bank record or written receipt
• Cash donations of $250 or more: contemporaneous written acknowledgment from the charity
• Non-cash donations over $500: Form 8283 must be filed
• Non-cash donations over $5,000: qualified appraisal required (except for publicly traded securities)

Quid pro quo contributions: If a charity provides goods or services in exchange for a contribution, only the excess above the fair market value of what was received is deductible.

Carryforward: Contributions that exceed the AGI limits carry forward for up to 5 years, retaining their character.

Medical and Dental Expenses

Medical expenses are deductible to the extent they exceed 7.5% of AGI. This floor applies regardless of age.

Deductible medical expenses include: premiums for health insurance not paid pre-tax by an employer, prescription drugs, doctor and hospital fees, and the cost of medically necessary equipment.

Non-deductible items include: cosmetic surgery (unless to correct a deformity from disease or accident), gym memberships, and over-the-counter medications not prescribed.

Long-term care insurance premiums are deductible as medical expenses up to age-based limits ranging from $480 to $6,020 (2024 figures for ages 40 and under to over 70).

Miscellaneous Deductions: Mostly Gone

The TCJA suspended all miscellaneous itemized deductions subject to the 2% AGI floor through 2025. This includes:

• Unreimbursed employee business expenses
• Investment advisory fees
• Tax preparation fees
• Job search expenses
• Safe deposit box fees

Still deductible as miscellaneous itemized deductions (no 2% floor):

• Gambling losses (but only up to gambling winnings — you cannot net a gambling loss)
• Casualty and theft losses from federally declared disasters (reduced by $100 and 10% of AGI)
• Impairment-related work expenses of a disabled employee

The Pease Limitation

The TCJA also suspended the Pease limitation (the overall reduction in itemized deductions for high-income taxpayers) through 2025. It may return in 2026 if current law expires, so watch for legislative updates before the exam.

Exam Strategy

The most common wrong answers on itemized deduction questions involve applying old law. Watch for:

• Answer choices that include employee business expenses as deductible — they're not (through 2025)
• SALT amounts that ignore the $10,000 cap
• Home equity interest deducted without regard to how proceeds were used
• Medical expenses deducted without the 7.5% floor

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