Arkansas Tax Form AR3 - Itemized Deduction Schedule Instructions

MEDICAL AND DENTAL EXPENSES

List only amounts you paid and for which you were not reimbursed.

LINE 1. Enter total medical and dental expenses, less reimbursements, from insurance or other sources. See chart on Page 19 for examples of deductible and nondeductible expenses.

LINE 2. Enter total amount from Form AR1000/AR1000NR, Lines 28A and 28B.

LINE 3. Multiply Line 2 by 7.5% (.075).

LINE 4. Subtract Line 3 from Line 1.

TAXES

LINE 5. You may deduct real estate taxes you paid on property you own that was not used for business. Do not include any special assessment or levy taxes.
Some taxes you cannot deduct are:

Arkansas income taxes
Sales tax
Federal income taxes
Estate taxes
Improvement taxes
Federal Social Security taxes
Hunting and fishing licenses
Dog licenses
Cigarette and beverage taxes
Car tags

LINE 6. You may deduct on this line:

Personal property taxes
Taxes paid to a foreign country on income taxed on this return
City income tax
Mississippi gambling tax

LINE 7. Add the amounts on Lines 5 and 6.

INTEREST EXPENSE

LINE 8. You may deduct the home mortgage interest paid to a bank or other financial institution.

The deduction is generally limited to interest attributable to a debt for not more than the cost of the principal, and/or second residence, plus improvements.

LINE 9. Deduct home mortgage interest paid to an individual on this line, and list that person’s name and address.

LINE 10. Enter the amount of deductible points on this line. Deductible points are those that:

1. Are incurred in the purchase or improvement of the taxpayer’s principal residence; and
2. Reflect an established business practice of charging points in the geographical area where the loan is made; and
3. Do not exceed the number of points generally charged for the type of transaction. (Points paid in refinancing a mortgage must be amortized over the life of the loan.)

NOTE: In order to deduct the full amount of the points paid, payment of the points must be made from separate funds brought to the loan closing.

LINE 11. Enter deductible investment interest. The deduction is limited to the amount of investment income. Interest that is disallowed because of the limitation can be carried forward to the next year and deducted to the extent of the limitation in the carryover year. Attach Federal Form 4952.

LINE 12. Add Lines 8, 9, 10, and 11.

CONTRIBUTIONS

LINE 13. Enter the total contributions you made by cash or check. If you gave $3,000 or more to any one organization, list the donee and amount given. If you have non-cash contributions of $500 or more, attach Federal Form 8283.

LINE 14. In addition to other contributions, a deduction is allowed for the donated value of artistic, literary, and musical creations if the following qualifications are met:

1. The taxpayer making the donation derived at least fifty percent (50%) of his/her current or prior year income from an art related profession;
2. The fair market value of the art work has been verified by an approved independent appraiser, and a copy of the appraisal is attached;
3. The artwork was donated to a museum, art gallery, or nonprofit charitable organization qualified under Internal Revenue Code § 501(C)(3) and located in the State of Arkansas; and
4. The deduction for donated art work does not exceed fifteen percent (15%) of the donor’s gross income in the calendar year of donation.

LINE 15. Deduct any check-off contributions made on your 2007 Arkansas return to any of the following:

Arkansas Disaster Relief Program
U.S. Olympic Committee Program
Arkansas Schools for the Blind and Deaf
Baby Sharon’s Children’s Catastrophic Illness Program
Organ Donor Awareness Education Program
Area Agencies on Aging Program
Military Family Relief Program
Newborn Umbilical Cord Blood Initiative

LINE 16. List other deductible contributions:

1. Unreimbursed amounts spent to maintain an elementary or high school student (other than a dependent or relative) in a taxpayer’s home under a program sponsored by a charitable organization.
2. A gift of property to a non-profit organization. Attach a description of the property, date of gift, and method of valuation. For each gift in excess of $500, list any conditions attached to the gift, manner of acquisition, and cost or basis if owned by you for less than five (5) years. Attach a signed copy of appraisal.

NOTE: Payments to private academies or other schools for the education of dependents are not deductible as contributions.

LINE 17. If you made contributions in excess of fifty percent (50%) of your adjusted gross income, you may carry the excess deduction over for a period of five (5) years.

If you are deducting an excess contribution from a previous year, enter the amount and year of the original contribution.

LINE 18. Add lines 13, 14, 15, 16 and 17.

CASUALTY AND THEFT LOSSES

LINE 19. The method of computing casualty or theft losses is the same as the Federal method (with the $100 exclusion). The amount of each loss must exceed ten percent (10%) of your adjusted gross income. Attach Federal Form 4684 and supporting documents.

If you have a Disaster Loss in 2009 on property located in an area designated by the President of the United States as a disaster area, you may elect to deduct the loss as an itemized deduction in 2008. If you elect to report the loss on your 2008 return, you cannot report the loss on your 2009 return. Attach a Federal schedule listing the disaster loss.

A disaster loss is the only loss which may be carried back. You may amend your 2007 return to report a disaster loss incurred in 2008. If you elect to amend your 2007 return, you cannot report the loss on your 2008 return.

LINE 20. Enter your Post-Secondary Education Tuition Deduction and attach Form AR1075(s).

MISCELLANEOUS DEDUCTIONS SUBJECT TO THE 2% AGI LIMITATION

LINE 21. Enter unreimbursed employee business expenses. Arkansas recognizes the federal mileage allowance for computing business travel expenses. Attach Federal Form 2106.

LINE 22. Other deductions include:

Union or professional dues
Tax return preparation fees
Expenses for safety equipment
Expenses of entertaining customers
Tools and supplies
Fees paid to employment agencies
Attach supporting schedule or statement.

LINE 23. Add Lines 21 and 22.

LINE 24. Enter combined amount from Form AR1000/AR1000NR, Lines 28A and 28B.

LINE 25. Multiply Line 24 by 2% (.02).

LINE 26. Subtract Line 25 from Line 23. This is your total allowable miscellaneous deductions.

OTHER MISCELLANEOUS DEDUCTIONS

LINE 27. Enter your miscellaneous deductions not subject to the 2% AGI limit. Attach detailed schedule of each deduction.

LINE 28. Add Lines 4,7,12,18,19,20,26 and 27. If the amount(s) on AR1000/AR1000NR Lines 28A and 28B are greater than $159,950 ($79,975 if married filing separately on separate returns), then complete the itemized deduction worksheet on Page 20 to calculate the amount you may deduct.

PRORATED ITEMIZED DEDUCTIONS

LINE 29. If you are filing separately, Status 4 or 5, you must prorate your itemized deductions between spouses. Enter your AGI from Line 28, Column A and your spouse’s AGI from Line 28, Column B of the AR1000/AR1000NR.

LINE 30. Add Lines 29A and 29B.

LINE 31. Divide Line 29A by Line 30 and enter the percentage here. Round to the nearest whole percent.

LINE 32. Multiply the total itemized deductions reported on Line 28 by your percentage on Line 31. Enter result here and on AR1000/AR1000NR, Line 29, Column A.

LINE 33. Subtract Line 32 from Line 28. Enter result here and on AR1000/AR1000NR, Line 29, Column B. If you and your spouse are using Filing Status 5, this is the amount of the total itemized deductions your spouse is allowed to claim on his/her tax return.

Deductible vs. Non-deductible Medical Expenses

ITEMIZED DEDUCTIONS WORKSHEET

Taxpayers with higher incomes may not be able to deduct all of their itemized deductions. If the combined AGI amount on Form AR1000/AR1000NR, Lines 27A and 27B, is more than $159,950 ($79,975 if filing status 5), use the worksheet below to figure the amount you may deduct.