What Are Itemized Deductions?
An itemized tax deduction reduces taxable income and lowers taxes by subtracting expenses from your adjusted gross income (AGI). Taxpayers can choose between itemizing deductions like mortgage interest, charitable donations, and unreimbursed medical expenditures or taking the standard deduction—a predetermined amount based on filing status.
Understand Itemized Deductions
Itemized deductions lower taxable income, with savings based on the tax rate. Consider a single filer with a gross income of $80,000 who claims $15,000 in itemized deductions. Those deductions reduce gross income to $65,000, which falls under a 22% marginal tax bracket for 2023 and 2024.
Record itemized deductions on Schedule A of Form 1040. In the event of an IRS audit, taxpayers must save all receipts and spending paperwork. Bank statements, insurance bills, medical bills, and qualifying charity organization tax receipts provide further documentation.
Tax deductions differ from tax credits, which immediately lower your tax burden. If your taxes are due at $14,000 and you qualify for a $1,000 tax credit, your bill drops to $13,000.
Itemized vs. Standard Deduction
Most taxpayers can itemize or take the basic deduction. Nonresident aliens must itemize, and married persons filing separately must claim the same deduction.
Choosing the deduction type with the lowest tax obligation is crucial. Single taxpayers or married couples filing separately will benefit from the standard deduction of $13,850 for 2023 or $14,600 for 2024 if their itemized deductions are less.
| Standard Deductions for 2023 and 2024 | ||
| Filing Status | 2023 Standard Deduction | 2024 Standard Deduction |
| Single | $13,850 | $14,600 |
| Married Filing Separately | $13,850 | $14,600 |
| Head of Household | $20,800 | $21,900 |
| Married Filing Jointly | $27,700 | $29,200 |
Which items can I list?
It’s possible to itemize medical costs, mortgage interest, charity donations, and state and local taxes. You may access the list on the IRS website. Taxpayers compute and list deductions on IRS Form 1040, Schedule A.
Download Schedule A from the IRS website.
Suppose you acquired a property after December 16, 2017. In that case, depending on the organization, you can deduct mortgage interest on a loan of $750,000 or less, plus charitable gifts of up to 60% of your AGI.
Deduct eligible medical and dental expenditures above 7.5% of AGI, state and local taxes, real estate and personal property taxes up to $10,000 or $5,000 if married filing separately, gambling losses, and investment interest below investment income.
What can you list?
Itemized Deductions
- Mortgage interest on the first $750,000—or $1 million if you acquired the house before December 16, 2017—of debt.
- Donations up to 60% of AGI
- Dental and medical costs exceed 7.5% of AGI
- Up to the IRS threshold, state and local income, plus personal property or sales taxes
- Gambling losses up to winnings
- Interest in investing
Non-Itemized Deductions
- Unless you acquired your house before December 16, 2017, mortgage interest on loans exceeding $750,000
- State and local sales, income, and property taxes beyond the IRS threshold
- Unpaid employee expenses
- Tax preparation costs
- Natural catastrophe losses beyond federal disaster zones
Itemized deductions—what are they?
Your income tax return might include the standard deduction, a predetermined dollar amount dependent on your filing status, or itemized deductions. Unlike the standard deduction, the dollar amount of itemized deductions depends on Schedule A costs on Form 1040. The taxpayer subtracts it from taxable income.
Which expenses may I itemize?
Use Schedule A of Form 1040 to itemize deductions. General deductions include unreimbursed medical, dental, long-term care, mortgage interest, charity donations, taxes, casualties, theft, and gaming losses.
Which party should itemize deductions?
You can itemize or take the standard deduction. If itemizing costs exceed the standard deduction, it may be worth it.
What Are the 2023 and 2024 Standard Deduction Amounts?
The standard deduction for singles and couples filing separately is $13,850 in 2023 and $14,600 in 2024. Standard deduction for heads of families is $20,800 in 2023 and $21,900 in 2024. The standard deduction for couples filing jointly is $27,700 in 2023 and $29,200 in 2024.
The Verdict
An itemized deduction reduces your tax payment by subtracting it from your AGI. Taxpayers can itemize or take the standard deduction for their filing status. Form 1040 Schedule A allows itemized deductions for mortgage interest, charitable gifts, and unreimbursed medical expenditures.
Conclusion
- Itemized deductions lower tax liability by subtracting expenses from adjusted gross income.
- Itemized deductions must be on Form 1040, Schedule A.
- Taxpayers can itemize or take the standard deduction for their filing status.
