Schedule A demystified: A guide to itemized deductions for US expats

When it comes to taxes, US citizens, including expatriates, often find themselves asking: “Should I itemize my deductions or stick with the standard deduction?” 

Enter Schedule A (Form 1040) – a valuable tool for taxpayers who want to maximize their deductions by listing specific eligible expenses.

Here’s everything you need to know about Schedule A, why it matters for US expats, and how to make it work for you.

What is Schedule A, and why does it matter?

Schedule A is a form attached to your Form 1040 that allows you to itemize deductions instead of taking the standard deduction.

By itemizing, you report specific expenses – like medical costs, mortgage interest, or charitable donations – that reduce your taxable income.

Standard deduction vs. itemized deductions

The IRS sets a standard deduction each year, which is a fixed amount you can deduct from your income without providing detailed records. 

The IRS adjusts standard deduction amounts annually for inflation. Here’s a comparison of 2024 and 2023 figures to help you evaluate your filing strategy:

If your total eligible expenses exceed the standard deduction, itemizing on Schedule A might save you more money.

To itemize, you’ll need to gather documentation for qualifying expenses – like medical bills, mortgage interest statements, or charitable donation receipts – and record these amounts in the appropriate sections on Schedule A.

Each category has specific rules and limits, so it’s crucial to follow IRS guidelines. Once completed, Schedule A is attached to your Form 1040 and submitted with your tax return.

Think of it as upgrading to business class for the same price – worth it when your receipts stack up.

Who should use Schedule A?

1. Taxpayers with high deductions

If you’ve had a year of hefty medical bills, significant charitable donations, or property taxes through the roof, itemizing is likely a better option.

2. US expats with unique circumstances

Expatriates often deal with situations that may make itemizing a good fit:

• Paying foreign property taxes on a home abroad.
• Donating to international charities (if they’re IRS-approved).
• Mortgage interest on a home in the US or overseas.

NOTE! Expats must also manage tax treaties, foreign earned income exclusions, and other factors that impact their US tax liability.

Key categories of itemized deductions on Schedule A

Here’s a breakdown of what you can deduct on Schedule A:

Medical and dental expenses

You can deduct unreimbursed medical and dental expenses that exceed 10% of your adjusted gross income (AGI).

This includes:

• Doctor visits, surgeries, and prescriptions.
• Health insurance premiums (if not paid pre-tax).
• Travel costs for medical care (yes, even that Uber to the ER).

Pro tip: If you live abroad and rely on foreign healthcare systems, expenses like private insurance or treatments not covered may be deductible.

State and local taxes (SALT)

You can deduct up to $10,000 of the total amount you paid in:

• State and local income taxes or sales taxes (choose one).
• Property taxes.

Pro caveat: If you’re living in a country with no US state taxes to worry about, this deduction might not apply to you.

Mortgage interest

Interest on your home mortgage is deductible, with limits:

• Loans taken before December 15, 2017, are deductible up to $1 million of mortgage debt.
• Loans after this date are capped at $750,000.

Pro bonus: If you own property abroad, mortgage interest may still qualify, but only if it’s a secured debt tied to a qualified home.

Charitable contributions

Donations to IRS-qualified organizations are deductible up to 60% of your AGI.

This includes cash donations, property, and even expenses related to volunteering (mileage counts!).

Pro tip: Contributions to foreign charities generally aren’t deductible unless the organization has US approval. Always check the IRS list of qualified organizations before making a big donation.

Casualty and theft losses

You can only deduct losses from federally declared disasters (think hurricanes, wildfires, or floods). Casualty losses are now far less common due to changes under the Tax Cuts and Jobs Act (TCJA).

Note! If your favorite US sports team keeps losing, unfortunately, that’s not deductible. ;)

The expat advantage: Itemized deductions for overseas living

While expats often use tools like the Foreign Earned Income Exclusion (FEIE) or foreign tax credits to reduce their US taxes, itemizing can still play a significant role.

Consider these unique opportunities:

1. Foreign housing deductions: If you own or rent overseas, housing expenses may qualify for deductions, depending on your circumstances.
2. Dual taxation considerations: In some cases, paying taxes abroad can complement US deductions like SALT.
3. International mortgage deductions: Mortgage interest on properties abroad might still be deductible under US rules.

How to file Schedule A

Filing Schedule A is straightforward, especially with the help of a CPA or tax software.

Here’s how it works:

1. Gather your receipts: Medical bills, property tax statements, donation acknowledgments – get them all.
2. Calculate your deductions by category: Add up eligible expenses for each category listed above.
3. Compare totals to the standard deduction: If your itemized deductions exceed the standard amount for your filing status, itemizing makes sense.
4. Attach Schedule A to Form 1040: Submit your completed Schedule A with your tax return.

Schedule A preview

Common mistakes to avoid when itemizing deductions

Even seasoned taxpayers can slip up when itemizing deductions, especially when living abroad.

Here are some frequent mistakes and how to avoid them:

1. Forgetting foreign-specific rules

Expats often underestimate how living overseas impacts their US deductions.

For example:

• Local taxes and US deductions: Some foreign property taxes might not be deductible if they don’t meet IRS guidelines.
• Currency exchange rates: Always convert foreign expenses into US dollars using IRS-approved exchange rates. Misreporting these amounts can trigger red flags during an audit.
• Expat-specific tools: Tools like the FEIE or foreign tax credits can interact with your deductions, so consult a tax professional to ensure you’re optimizing your situation.

Pro tip: Review IRS Publication 54 for rules specific to expats and double-check any foreign expense eligibility for Schedule A.

2. Misreporting charitable donations

Charitable giving is a wonderful way to make an impact – and snag a deduction – but expats face unique challenges:

• Eligible charities: Only donations to IRS-approved organizations qualify. Foreign charities are usually not deductible unless they are registered as a US 501(c)(3).
• Proper documentation: The IRS requires written acknowledgment for contributions over $250. If donating property, ensure you have a qualified appraisal for high-value items.

Pro tip: Use the IRS Tax Exempt Organization Search tool to verify if a charity is eligible for deductions.

3. Not keeping records

The IRS loves documentation, and nothing stalls a smooth tax season like missing receipts.

Common pitfalls include:

• Incomplete receipts: Make sure receipts show the organization name, donation amount, and date.
• Overlooking medical expense records: Keep all medical and dental bills, insurance statements, and transportation expenses tied to healthcare.
• No proof of payment: Bank statements or canceled checks are vital for substantiating deductions.

Pro tip: Set up a digital filing system to store receipts and documents year-round. Tax prep will feel less like pulling teeth when you’re organized!

Bottom line

Schedule A is a powerful tool for US taxpayers, especially expats navigating the complexities of international life.

By understanding your deductible expenses, comparing itemized deductions to the standard deduction, and seeking expert help when needed, you can minimize your tax burden – and keep more money for the adventures that await you.

Got questions? We’ve got answers. Reach out to Taxes for Expats today, and let’s tackle your taxes together.