Selected itemized deductions, Schedule A, 1990-2001

Statistics of Income Bulletin, Winter, 2003 by Jason Walters, Victor Rehula, David Paris

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.