What is Tax Form 1040 Schedule L?

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As you may know, every taxpayer is allowed to take a standard deduction, or to itemize their deductions if it will more greatly reduce their tax obligation.

Some taxpayers have many deductions that can add up to more than the standard deduction. This is particularly true for homeowners, whose deductible mortgage interest can add up to far more than the standard deduction.

What you may not know is that the standard deduction isn’t static, as it can increase based on certain factors. Using Form 1040 Schedule L, you can increase your standard deduction by the amount you paid in certain state and local real estate taxes, new motor vehicle taxes, and the amount of a net disaster loss.

Filling out Schedule L requires some standard identification information: your name, social security number, and filing status. You’ll also need any paperwork related to your state and local real estate taxes, your new motor vehicle taxes, and any net disaster loss.

If you’re increasing your deduction by the amount of a net disaster loss, you’ll need a copy of your Form 4684, the form used to report disaster losses. The amount of your net disaster loss is shown on Form 4684. You’ll copy that number to line 6 of your Schedule L.

On line 7 of the Schedule L, you’ll report any real estate taxes you paid, provided that they were based on the assessed value of the property. (The assessment must also be uniform throughout your community, and provide funds for general community or governmental purposes. Most local taxes fall into this category.)

There are a few categories of tax that you cannot include on this line:

  • Taxes on foreign real estate, and any taxes you can deduct when calculating adjusted gross income, such as taxes on business real estate.
  • Itemized charges for services to specific properties. For example, monthly charges for trash collection, flat fees for the amount of water consumed, or flat charges for mowing lawns that had grown above levels allowable under city ordinances.
  • Charges for improvements that tend to increase your property value. For example, assessments to build a new sidewalk. You can deduct a charge if it used only to maintain an existing facility in service, such as repairing an existing sidewalk, for example.
  • If your mortgage payment includes taxes, you may deduct only the amount paid by your mortgage lender to your taxing authority.

Next up, if you or your spouse purchased a new motor vehicle this year, you may be able to deduct certain state and local sales and excise taxes. To do so, your income will have to fall within certain maximums spelled out on the Schedule L. (In tax year 2009, those amounts were $135,000 for single filers and $260,000 for joint married filers.)

You’ll have to refer to the invoice of the car purchase in order to find the amount to deduct via Schedule L. Some states do not have a sales tax, but do charge other taxes on the sale of new motor vehicles. You may deduct fees and taxes assessed on the purchase of the vehicle that are based on the purchase price or a per unit basis.

You cannot decrease your deduction by the amount of any taxes that were deducted while calculating your adjusted gross income, such as taxes paid on a vehicle used for your business. For purposes of this form, “motor vehicle” generally means a standard passenger car or light truck, a motorcycle, or motor home. The Schedule L has specific instructions for what vehicles qualify as motorcycles or motor homes.

As always, if you find the maze of tax forms confusing, it’s a good idea to contact a professional. A skilled accountant can make sure you don’t pay too much or too little. That’s generally worth the price you’ll pay them.  Should you need help filing your taxes this year, you may want to consider both Turbo Tax and H&R Block.  Their free online tax software can make your tax nightmares disappear.

Published or Updated: April 4, 2013
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

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