Selected itemized deductions, Schedule A, 1990-2001

Jason Walters

Data Release

Itemized deductions (after limitations) claimed on Schedule A increased significantly over the period 1990-2001, from $458.5 billion to $884.5 billion. Tax Year 1990 itemized deductions (after limitations) represented 13.5 percent of Adjusted Gross Income (AGI), while, for Tax Year 2001, they increased to 14.3 percent. The number of taxpayers claiming itemized deductions jumped from 28.3 percent of individual tax returns for Tax Year 1990 to 34.2 percent for Tax Year 2001. Itemized deductions also increased from 58.0 percent of all deductions for Tax Year 1990 to 64.7 percent of all deductions for Tax Year 2001. Interest paid was the largest itemized deduction of taxpayers over the period 1990-2001, with home mortgage interest being the largest percentage of interest paid. Taxes paid, the second largest deduction, had the largest positive percentage change and highest frequency of itemized deductions. This data release consists of data from 1990-2001 (see Table 1 in this article for the data). Also, see Selected Years of Historical and Other Data Section (Table 1) in the SOI Bulletin for pre-1990 itemized deduction data.

Itemized Deductions

Between 1990 and 2001, the number of tax returns claiming itemized deductions increased by 38.5 percent, whereas the total number of tax returns increased by only 14.2 percent. Thus, the share of taxpayers itemizing their deductions increased by 21.3 percent, rising from 28.5 percent of all taxpayers for 1990 to 34.6 percent for 2001.

The total amount of itemized deductions before limitations (in constant dollars) increased at an average annual rate of 3.6 percent between 1990 and 2001. Between 1991 and 1994, the annual changes were relatively small, ranging from a decrease of 1.7 percent to an increase of 0.4 percent. The increases were much larger between 1995 and 2000, ranging from a low of 4.1 percent for 1995 to as high as 8.1 percent for 1999 and 7.6 percent for 2000. For 2001, the increase was 3.5 percent.

Over the period 1990-2001, interest paid was the largest itemized deduction taken by individual taxpayers. The total interest paid deduction (in constant dollars) grew at an average annual rate of 2.0 percent. Total interest paid in constant dollars was $208.4 billion for 1990, compared to $258.2 billion for 2001. The growth rate of home mortgage interest, which comprised between 90 percent and 95 percent of the total interest paid over the period 1990-2001, increased at an average annual rate of 2.3 percent. Total interest paid in constant dollars declined for 1992, 1993, and 1994. Beginning for 1995, total interest paid increased continually at rates ranging from 5.0 percent to 7.1 percent a year.

The deduction for taxes paid was the most frequently claimed itemized deduction and the second largest itemized deduction for individual taxpayers over the entire period of this study. This deduction (in constant dollars) increased at a faster rate than the deduction for interest paid. The average annual increase in the amount of taxes paid deduction (in constant dollars) was 4.5 percent. Between 1995 and 2000, the deduction for taxes paid (in constant dollars) grew at rates ranging from 4.3 percent to 7.9 percent. For 2001, the taxes paid deduction increased only 1.6 percent.

Charitable contributions were the third largest itemized deduction. Between 1990 and 2001, charitable contributions (in constant dollars) increased at an average rate of 5.5 percent. Charitable contributions increased slowly from 1991 to 1995. For 1996 through 2000, charitable contributions increased significantly faster than these earlier years, growing at an average annual rate of 10.4 percent. For 2001, however, the deduction for charitable contributions declined by 3.7 percent. The 2001 decline is attributable to a 21.8-percent drop (in constant dollars) in other than cash contributions. In contrast, cash contributions increased by 5.4 percent (in constant dollars). Between 1990 and 2001, the average annual growth rate of other than cash charitable contributions was 12.7 percent in constant dollars. Other than cash contributions increased from 13.1 percent of total charitable contributions for 1990 to 33.6 percent for 2000, before declining to 27.3 percent for 2001.

Miscellaneous deductions subject to a 2-percent AGI floor increased (in constant dollars) each year and had an average annual growth rate of 5.3 percent between 1990 and 2001. Employee business expenses represented the largest part of miscellaneous deductions, averaging 69.9 percent of miscellaneous deductions subject to the 2-percent AGI floor between 1990 and 2001. Employee business expenses (in constant dollars) were $21.8 billion for 1990 and $42.3 billion for 2001, increasing at an average annual rate of 6.2 percent.

The average annual growth rate (in constant dollars) for medical and dental expenses after the 7.5-percent AGI floor was 4.5 percent. The amount of medical and dental expenses deducted did not change greatly from 1990 to 1996, and, for 1993 to 1996, the amount declined each year. Since 1997, medical and dental expenses increased significantly. The annual growth rate in constant dollars ranged from 6.0 percent for 1997 to 16.7 percent for 2001. The average annual growth rate was 9.9 percent from 1997 to 2001.

Gambling losses and other unlimited miscellaneous deductions, from 1990-2001, had an average annual growth rate of 12.8 percent. For 1990, the gambling losses and other unlimited miscellaneous deductions totaled $2.3 billion, with gambling losses representing 84.4 percent or $1.9 billion. For 2001, gambling losses made up 86.0 percent (or $7.4 billion) of the $8.6-billion total. The average annual growth rate of the gambling loss deduction (in constant dollars) was 16.7 percent for 1993 to 2001.

Casualty and theft losses deduction amounts varied greatly over the 1990-2001 period. The average annual growth rate of casualty and theft loss deductions (in constant dollars) was 5.3 percent. In 1992, Hurricane Andrew caused a record $26.5 billion dollars in damage and helped lead to a 145.7-percent annual growth rate, in constant dollars, from the previous year. In 1993, Midwest flooding caused $23.1 billion in damage, and deductions in constant dollars grew by 23.2 percent from 1992. In 2001, multiple hurricanes and a national drought contributed to a 63.5-percent annual growth rate, in constant dollars, from 2000 [1].

Changes in Law

Starting with Tax Year 1991, total itemized deductions for certain high-income taxpayers were limited (Revenue Reconciliation Act of 1990). The limitation did not apply to the following itemized deductions: (1) medical and dental expenses, (2) investment interest expenses, (3) casualty and theft losses, and (4) gambling losses. All other itemized deductions were subject to the limitation. To calculate allowable itemized deductions, total itemized deductions were reduced by the lesser of: (a) 80 percent of the nonexempt deductions, or (b) 3 percent of the amount of AGI in excess of the threshold limitation. The AGI threshold for this limitation is indexed annually for inflation. The threshold limitation for Tax Year 1991 was $100,000 ($50,000 if married filing separately). For Tax Year 2001, the threshold limitation was $132,950 ($66,475 if married filing separately). Other changes in the period 1990-2001 included the phaseout of the personal interest deduction (e.g., interest on car loans, credit card balances), which was completed in 1991 when personal interest no longer could be deducted.

For any charitable contribution of $250 or more to be claimed as an itemized deduction, a written acknowledgement from the qualified recipient organization was necessary, beginning for 1994 [2]. Also, beginning for 1994, current-year moving expenses were no longer allowed as an itemized deduction; they were deducted as a statutory adjustment to AGI.

Effective for 1997, there was an expansion of the definition of medical and dental expenses, which included payments for certain long-term care insurance premiums and the unreimbursed cost of certain long-term care of a chronically-ill individual [3].

Data Sources and Limitations

A sample of individual tax returns (Forms 1040, 1040A, 1040EZ, including electronically-filed returns; 1040PC for Calendar Years 1992-1999, and 1040T for Calendar Year 1995) filed for Calendar Years 1990 through 2001 were used as a basis for these statistics. From Calendar Year 1991 onward, stratification of returns in the sample was based on the following: (1) the larger of positive income or negative income; (2) the presence or absence of specific forms or schedules; (3) the size of business and farm receipts; and (4) the usefulness of returns for tax policy modeling purposes. Returns were then selected at rates ranging from 0.02 percent to 100 percent depending on the Tax Year.

Since the data represented here are estimates based on a sample of returns filed, they are subject to sampling error. To properly use the statistical data provided, the magnitude of the potential sampling error must be known; coefficients of variation (CVs) are used to measure that magnitude. The reliability of estimates based on samples, and the use of CVs for evaluating the precision of estimates based on samples, are discussed in the Appendix to this issue of the Bulletin.

Notes and References

[1] Department of Commerce; National Oceanic and Atmospheric Administration; “Billion Dollar U.S. Weather Disasters since 1980.”

[2] Social Security Domestic Employment Reform Act of 1994 (IR Code Section 170 (f) (8)).

[3] The Health Portability and Accountability Act of 1996 (IR Code Section 213 (d) (10)).

This data release was written by Jason Walters, economist, and Victor Rehula, statistician, with the Individual Statistics Branch, under the direction of David Paris, chief.

Table 1.–Selected Deductions, 1990-2001

[Number of returns is in thousands–moneyamounts are in millions of dollars]

Total itemized deductions before limitation

Constant 1990

Tax year dollars (2)

Number of Current Percentage

returns (1) dollars Amount change

(1) (2) (3) (4)

1990 32,175 458,485 458,485 N/A

1991 32,490 478,541 459,253 0.2

1992 32,541 494,697 461,041 0.4

1993 32,821 503,160 454,936 -1.3

1994 33,018 507,010 447,099 -1.7

1995 34,008 542,931 465,636 4.1

1996 35,415 591,624 493,020 5.9

1997 36,625 644,074 524,490 6.4

1998 38,186 703,408 560,932 6.9

1999 40,244 773,342 606,543 8.1

2000 42,534 860,427 652,827 7.6

2001 44,562 915,510 675,653 3.5

Avg. annual growth

rate 1990-2001 3.0 6.5 3.6 N/A

Medical and dental expenses after 7.5-percent

AGI limitation

Constant 1990

Tax year dollars (2)

Number of Current Percentage

returns (1) dollars Amount change

(5) (6) (7) (8)

1990 5,091 21,457 21,457 N/A

1991 5,339 23,726 22,770 6.1

1992 5,508 25,747 23,996 5.4

1993 5,490 26,510 23,969 -0.1

1994 5,229 26,378 23,261 -3.0

1995 5,351 26,964 23,125 -0.6

1996 5,397 27,002 22,502 -2.7

1997 5,256 29,284 23,847 6.0

1998 5,560 31,984 25,506 7.0

1999 5,884 35,376 27,746 8.8

2000 6,513 39,251 29,781 7.3

2001 7,572 47,072 34,739 16.7

Avg. annual growth

rate 1990-2001 3.7 7.4 4.5 N/A

Taxes paid

Constant 1990

Tax year dollars (2)

Number of Current Percentage

returns (1) dollars Amount change

(9) (10) (11) (12)

1990 31,594 140,011 140,011 N/A

1991 31,969 147,858 141,899 1.3

1992 31,959 160,453 149,536 5.4

1993 32,264 169,850 153,572 2.7

1994 32,569 175,848 155,068 1.0

1995 33,530 188,644 161,787 4.3

1996 34,855 203,776 169,813 5.0

1997 36,095 220,628 179,665 5.8

1998 37,576 241,783 192,809 7.3

1999 39,564 265,365 208,130 7.9

2000 41,824 294,712 223,605 7.4

2001 43,797 307,975 227,288 1.6

Avg. annual growth

rate 1990-2001 3.0 7.4 4.5 N/A

Interest paid (3)

Total

Constant 1990

Tax year dollars (2)

Number of Current Percentage

returns (1) dollars Amount change

(13) (14) (15) (16)

1990 29,395 208,354 208,354 N/A

1991 27,418 213,725 205,110 -1.6

1992 27,347 208,656 194,460 -5.2

1993 27,498 200,190 181,003 -6.9

1994 27,873 197,240 173,933 -3.9

1995 28,705 215,078 184,458 6.1

1996 29,803 233,151 194,292 5.3

1997 30,790 250,599 204,071 5.0

1998 32,024 271,624 216,606 6.1

1999 33,706 291,553 228,669 5.6

2000 35,405 322,932 245,016 7.1

2001 36,801 349,901 258,229 5.4

Avg. annual growth

rate 1990-2001 2.1 4.8 2.0 N/A

Interest paid (3)

Home mortgage interest

Constant 1990

Tax year dollars (2)

Number of Current Percentage

returns (1) dollars Amount change

(17) (18) (19) (20)

1990 26,679 189,233 189,233 N/A

1991 27,001 200,995 192,893 1.9

1992 26,984 196,946 183,547 -4.8

1993 27,173 188,594 170,519 -7.1

1994 27,518 185,709 163,765 -4.0

1995 28,350 203,074 174,163 6.3

1996 29,436 220,203 183,503 5.4

1997 30,436 235,970 192,158 4.7

1998 31,627 254,397 202,869 5.6

1999 33,268 272,149 213,450 5.2

2000 34,914 299,963 227,590 6.6

2001 36,331 330,692 244,053 7.2

Avg. annual growth

rate 1990-2001 2.8 5.2 2.3 N/A

Charitable contributions

Total

Constant 1990

Tax year dollars (2)

Number of Current Percentage

returns (1) dollars Amount change

(21) (22) (23) (24)

1990 29,230 57,243 57,243 N/A

1991 29,551 60,574 58,132 1.6

1992 29,603 63,843 59,500 2.4

1993 29,799 68,354 61,803 3.9

1994 29,849 70,545 62,209 0.7

1995 30,541 74,992 64,315 3.4

1996 31,592 86,159 71,799 11.6

1997 32,613 99,192 80,775 12.5

1998 33,836 109,240 87,113 7.8

1999 35,523 125,799 98,666 13.3

2000 37,525 140,682 106,739 8.2

2001 39,387 139,241 102,761 -3.7

Avg. annual growth

rate 1990-2001 2.7 8.4 5.5 N/A

Charitable contributions

Other than cash contributions

Constant 1990

Tax year dollars (2)

Number of Current Percentage

returns (1) dollars Amount change

(25) (26) (27) (28)

1990 11,830 7,494 7,494 N/A

1991 12,668 9,682 9,292 24.0

1992 13,344 9,633 8,977 -3.4

1993 14,098 12,279 11,102 23.7

1994 14,347 14,739 12,998 17.1

1995 14,930 13,522 11,597 -10.8

1996 16,037 21,299 17,749 53.1

1997 17,071 27,961 22,770 28.3

1998 18,106 29,256 23,330 2.5

1999 19,292 38,287 30,029 28.7

2000 21,244 47,256 35,854 19.4

2001 22,585 37,998 28,042 -21.8

Avg. annual growth

rate 1990-2001 6.1 15.9 12.7 N/A

Casualty and

theft losses

Constant 1990

Tax year dollars (2)

Number of Current Percentage

returns (1) dollars Amount change

(29) (30) (31) (32)

1990 112 734 734 N/A

1991 126 872 837 14.0

1992 122 2,207 2,057 145.7

1993 170 2,802 2,534 23.2

1994 225 3,484 3,072 21.3

1995 152 1,776 1,523 -50.4

1996 164 2,879 2,399 57.5

1997 105 1,064 866 -63.9

1998 99 1,194 952 9.9

1999 92 1,325 1,039 9.2

2000 83 1,039 788 -24.1

2001 97 1,747 1,289 63.5

Avg. annual growth

rate 1990-2001 -1.3 8.2 5.2 N/A

Miscellaneous deductions after 2-percent AGI

limitation

Total

Constant 1990

Tax year dollars (2)

Number of Current Percentage

returns (1) dollars Amount change

(33) (34) (35) (36)

1990 7,420 24,175 24,175 N/A

1991 7,473 26,044 24,994 3.4

1992 7,593 27,118 25,273 1.1

1993 7,791 28,764 26,007 2.9

1994 7,977 29,496 26,011 (4)

1995 7,979 31,027 26,610 2.3

1996 8,436 34,043 28,369 6.6

1997 8,663 37,427 30,478 7.4

1998 8,843 40,546 32,334 6.1

1999 9,277 44,730 35,083 8.5

2000 10,108 51,241 38,878 10.8

2001 10,969 57,909 42,737 9.9

Avg. annual growth

rate 1990-2001 3.6 8.3 5.3 N/A

Miscellaneous deductions after 2-percent AGI

limitation

Unreimbursed employee business expense

Constant 1990

Tax year dollars (2)

Number of Current Percentage

returns dollars Amount change

(37) (38) (39) (40)

1990 8,404 22,324 22,324 N/A

1991 8,463 23,680 22,725 1.8

1992 8,703 25,240 23,523 3.5

1993 9,263 28,213 25,509 8.4

1994 10,021 29,679 26,172 2.6

1995 10,435 32,568 27,931 6.7

1996 11,184 36,582 30,485 9.1

1997 11,414 39,336 32,032 5.1

1998 11,605 41,570 33,150 3.5

1999 12,040 45,805 35,925 8.4

2000 13,951 52,129 39,551 10.1

2001 14,227 57,367 42,337 7.0

Avg. annual growth

rate 1990-2001 4.9 9.0 6.0 N/A

Gambling losses and other unlimited

miscellaneous deductions

Constant 1990

Tax year dollars (2)

Number of Current Percentage

returns (1) dollars Amount change

(41) (42) (43) (44)

1990 750 2,295 2,295 N/A

1991 711 2,091 2,007 -12.6

1992 730 2,412 2,248 12.0

1993 727 2,770 2,504 11.4

1994 665 3,572 3,150 25.8

1995 752 4,450 3,817 21.2

1996 827 4,614 3,845 0.7

1997 779 5,880 4,789 24.5

1998 899 7,037 5,612 17.2

1999 1,082 9,195 7,212 28.5

2000 1,054 10,571 8,020 11.2

2001 1,144 11,666 8,609 7.3

Avg. annual growth

rate 1990-2001 3.9 15.9 12.8 N/A

Itemized deductions in excess of limitation

Constant 1990

Tax year dollars (2)

Percent

Number of Current -age

returns (1) dollars Amount change

(45) (46) (47) (48)

1990 N/A N/A N/A N/A

1991 3,282 10,855 10,418 N/A

1992 3,242 12,751 11,884 14.1

1993 3,312 12,756 11,533 -2.9

1994 3,378 13,356 11,778 2.1

1995 3,710 15,557 13,342 13.3

1996 4,053 19,083 15,902 19.2

1997 4,489 23,263 18,944 19.1

1998 4,917 26,948 21,490 13.4

1999 5,465 31,966 25,071 16.7

2000 6,030 38,066 28,882 15.2

2001 5,660 30,982 22,865 -20.8

Avg. annual growth

rate 1990-2001 6.0 (5) 11.0 (5) 8.0 (5) N/A

Total itemized deductions

after limitation

Constant 1990

Tax year dollars (2)

Number of Current Percentage

returns (1) dollars Amount change

(49) (50) (51) (52)

1990 32,175 458,485 458,485 N/A

1991 32,490 467,686 448,835 -2.1

1992 32,505 481,946 449,157 0.1

1993 32,821 490,404 443,403 -1.3

1994 33,018 493,654 435,321 -1.8

1995 34,008 527,374 452,293 3.9

1996 35,415 572,541 477,118 5.5

1997 36,625 620,810 505,546 6.0

1998 38,186 676,460 539,442 6.7

1999 40,244 741,377 581,472 7.8

2000 42,534 822,361 623,946 7.3

2001 44,562 884,528 652,788 4.6

Avg. annual growth

rate 1990-2001 3.0 6.2 3.3 N/A

Total standard

deduction

Constant 1990

Tax year dollars (2)

Number of Current Percentage

returns (1) dollars Amount change

(53) (54) (55) (56)

1990 80,621 331,457 331,457 N/A

1991 81,305 351,076 336,925 1.6

1992 80,072 366,534 341,597 1.4

1993 80,841 382,134 345,510 1.1

1994 81,947 397,106 350,182 1.4

1995 83,223 413,585 354,704 1.3

1996 83,997 426,103 355,086 0.1

1997 84,844 441,696 359,687 1.3

1998 85,576 459,457 366,393 1.9

1999 85,755 463,960 363,891 -0.7

2000 85,671 470,821 357,224 -1.8

2001 84,238 481,908 355,651 -0.4

Avg. annual growth

rate 1990-2001 0.4 3.5 0.6 N/A

Total deductions

(after itemized deduction limitation)

Constant 1990

Tax year dollars (2)

Number of Current Percentage

returns (1) dollars Amount change

(57) (58) (59) (60)

1990 112,796 789,942 789,942 N/A

1991 113,795 818,762 785,760 -0.5

1992 112,577 848,479 790,754 0.6

1993 113,662 872,538 788,913 -0.2

1994 114,965 890,760 785,503 -0.4

1995 117,230 940,959 806,997 2.7

1996 119,412 998,644 832,204 3.1

1997 121,469 1,062,506 865,233 4.0

1998 123,763 1,135,918 905,835 4.7

1999 126,000 1,205,337 945,363 4.4

2000 128,205 1,293,181 981,169 3.8

2001 128,801 1,366,436 1,008,440 2.8

Avg. annual growth

rate 1990-2001 1.2 5.1 2.2 N/A

N/A-Not applicable.

(1) Returns with no adjusted gross income are excluded from the

deduction counts. For this reason, the sum of the number of returns

with total itemized deductions and the number of returns with total

standard deduction is less than the total number of returns for all

filers.

(2) Inflation-adjusted data were calculated, using the consumer

price index from U.S. Department of Labor, Bureau of Labor

Statistics, Monthly Labor Review; based on 1990=100 when 1990

CPI-U = 130.7; 2001 CPI-U = 177.1; 2000 CPI-U = 172.2;

1999 CPI-U = 166.6; 1998 CPI-U = 163.9; 1997 CPI-U = 160.5;

1996 CPI-U = 156.9; 1995 CPI-U = 152.4; 1994 CPI-U = 148.2;

1993 CPI-U = 144.5; 1992 CPI-U = 140.3; and 1991 CPI-U = 136.2.

(3) Includes investment interest and deductible mortgage “points”

not shown separately.

(4) Percentage less than 0.05.

(5) Average annual growth rate 1991-2001.

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