For Australians with US tax obligations, understanding Schedule A (Form 1040 or 1040-SR) can make a real difference at tax time. While the standard deduction remains the default for most, itemizing deductions on Schedule A could unlock bigger savings—if you know which expenses count, how the rules have changed for 2025, and when it’s worth the paperwork.
What Is Schedule A? Why Itemize?
Schedule A is the IRS form used to list and claim itemized deductions instead of the standard deduction. For 2025, the standard deduction for single filers is expected to be US$14,900 and US$29,800 for married couples filing jointly, thanks to inflation adjustments. But if your eligible expenses exceed those amounts, itemizing on Schedule A can reduce your taxable income—and your tax bill.
- Common itemized deductions: Mortgage interest, state and local taxes (SALT), charitable gifts, medical expenses, and more.
- Who should consider itemizing? Taxpayers with high medical bills, large charitable donations, or significant mortgage interest—especially in high-tax US states or with complex cross-border finances.
For Australians working in the US, dual citizens, or expats with American property or investments, Schedule A can be a game changer.
Key 2025 Updates: What’s Changed?
The IRS tweaks deduction limits annually to keep pace with inflation and legislative changes. Here are the headline changes for 2025:
- Medical expense threshold: Only unreimbursed medical expenses over 7.5% of your adjusted gross income (AGI) are deductible. This remains unchanged for 2025, but the actual dollar threshold rises with income.
- SALT (state and local tax) cap: The $10,000 limit on SALT deductions is still in effect for 2025, despite ongoing lobbying for an increase. This cap affects many high-income earners, especially in states like California and New York.
- Charitable deductions: The temporary COVID-19-era enhancements have expired. For 2025, cash gifts to qualifying charities are deductible up to 60% of AGI; non-cash gifts follow regular rules.
- Mortgage interest: Deductible on up to $750,000 of home acquisition debt for mortgages secured after December 15, 2017.
Always check if your circumstances or residency status affect your eligibility—especially for dual residents or those using the US-Australia tax treaty.
How to Maximise Your Itemized Deductions
Getting the most from Schedule A requires smart record-keeping and a strategy tailored to your situation. Here’s how to approach it in 2025:
- Aggregate your expenses: Tally up all potential deductions—medical, SALT, mortgage interest, and charitable gifts. Compare the total to the standard deduction for your filing status.
- Medical expenses: Include unreimbursed costs for yourself, spouse, and dependents—think dental, vision, mental health, and some travel for care. Only the portion above 7.5% of AGI is deductible.
- SALT: Combine state income taxes, property taxes, and certain local taxes up to the $10,000 cap. For Aussies with US rental property, don’t forget property tax payments.
- Charitable gifts: Gather receipts for all cash and non-cash donations to qualifying US charities. Large gifts may require extra documentation or IRS Form 8283.
- Mortgage interest: Use Form 1098 from your lender to document deductible interest. For cross-border situations, check that the mortgage is secured by a US property and meets IRS criteria.
- Bundle deductions: If you’re close to the standard deduction threshold, consider “bunching”—timing charitable donations or elective medical expenses to alternate years for bigger impact.
Example: If you paid $8,000 in mortgage interest, $9,000 in SALT, $3,000 in medical expenses (with $2,000 above 7.5% of AGI), and $4,000 to charity, your itemized deductions total $23,000—well above the single filer standard deduction for 2025.
Common Pitfalls and Pro Tips
- Double-check eligibility: Expenses must be paid in the tax year and properly documented. Non-US charities generally aren’t deductible unless they have IRS-approved status.
- Beware of phase-outs: Some deductions, like medical expenses, have income-based limitations. High earners may see benefits reduced.
- Foreign taxes: Taxes paid to Australia may qualify for the Foreign Tax Credit instead of a Schedule A deduction—review both options for the best result.
- Use digital tools: Tax software or professional advice can help ensure you’re not missing hidden deductions.
Conclusion: Is Itemizing Worth It for You?
For Australians dealing with US taxes, Schedule A can turn routine tax filing into a real opportunity to save. The 2025 rules keep itemized deductions alive and well for those with significant eligible expenses. If your tally of mortgage interest, SALT, medical costs, and charitable gifts outpaces the standard deduction, itemizing could be your key to a lower tax bill and a bigger refund.
