A tax schedule is a form that the IRS requires with your income tax return if you have certain types of income or deductions. While the Form 1040 is the main body of your return, the schedules provide useful and necessary information for your complete taxable picture. Let’s take a look at the most common schedules.
On your tax return you choose whether to take the standard deduction or to itemize deductions – whichever offers you the biggest tax benefit. If you elect to itemize your deductions, Schedule A is where these deductions are captured. Some items commonly deducted by taxpayers include medical expenses, state taxes, sales taxes, mortgage expenses, and charitable contributions.
If you earn over a certain amount of interest or dividends during the year, you’ll be required to file a Schedule B. Most types of interest that you earn will be subject to federal income taxation. You will fill out your this schedule with the 1099s (either 1099-DIV for dividends or 1099-INT for interest) that you are provided by your financial institutions.
Those who are self employed must report their income and expenses on a separate form – the Schedule C. The Schedule C essentially operates as an income statement, beginning with gross receipts and taxing the gross profit after accounting for deductions and expenses.
A Schedule D is most commonly used to report capital gains and losses that comes from the trading or selling of capital assets during the year. Capital assets include more than just your investment assets, it also includes personal property, such as your home, car, and collectibles. Gains and losses are divided into two categories, short term and long term. If you held the asset for one year or less, it is considered short term.