Table of Contents
- What Are Itemized Deductions?
- Key Takeaways
- Understanding Itemized Deductions
- Itemized Deduction vs. Standard Deduction
- What Can I Itemize?
- What Does It Mean to Claim Itemized Deductions?
- Which Expenses Can I Itemize?
- Who Should Itemize Deductions?
- What Are the Standard Deduction Amounts for 2024 and 2025?
- The Bottom Line
What Are Itemized Deductions?
Let me explain what itemized deductions are: they're expenses you can subtract from your adjusted gross income (AGI) to cut down your taxable income and reduce the taxes you owe. As a taxpayer, you have the choice to itemize things like mortgage interest, charitable gifts, and unreimbursed medical expenses, or you can just take the standard deduction, which is a fixed amount based on your filing status.
Key Takeaways
Here's what you need to know right away: an itemized deduction is an expense subtracted from your adjusted gross income to lower your tax bill. You list these on Schedule A of Form 1040. And remember, you can either itemize or claim the standard deduction for your filing status—pick whichever saves you more.
Understanding Itemized Deductions
Itemized deductions directly lower your taxable income, and the amount you save depends on your tax bracket. For example, if you're an unmarried single filer with $80,000 gross income and you itemize $15,000 in deductions, your taxable income drops to $65,000, putting you in the 22% marginal tax rate bracket for 2024 and 2025.
You record these on Schedule A of Form 1040. Make sure to keep all receipts and documentation for those expenses, because the IRS might ask for them during an audit. That includes bank statements, insurance bills, medical bills, and receipts from qualified charities.
One important note: don't mix up tax deductions with tax credits. Deductions reduce your taxable income, while credits cut your tax bill directly. If you owe $14,000 and get a $1,000 credit, you only pay $13,000.
Itemized Deduction vs. Standard Deduction
Most taxpayers can choose to itemize or take the standard deduction. Nonresident aliens have to itemize, and if you're married filing separately, both spouses must use the same method.
Decide based on which gives you the lowest tax liability. If you're single or married filing separately, stick with the standard deduction of $14,600 for 2024 or $15,000 for 2025 if your itemized total is less than that.
Standard Deductions for 2024 and 2025
- Single: $14,600 (2024), $15,000 (2025)
- Married Filing Separately: $14,600 (2024), $15,000 (2025)
- Head of Household: $21,900 (2024), $22,500 (2025)
- Married Filing Jointly: $29,200 (2024), $30,000 (2025)
What Can I Itemize?
The list of itemizable expenses is long, covering some medical expenses, mortgage interest, charitable contributions, and state and local taxes. Check the full list on the IRS website. You calculate and list them on Schedule A of Form 1040.
You can deduct mortgage interest on loans up to $750,000 for homes bought on or after December 16, 2017, and charitable donations up to 60% of your AGI, depending on the contribution type and charity.
Also deductible are qualified unreimbursed medical and dental expenses over 7.5% of your AGI; state and local income or sales taxes plus real estate and personal property taxes up to $10,000 (or $5,000 if married filing separately); gambling losses up to your winnings; and investment interest less than your investment income.
Deductions You Can Itemize
- Mortgage interest on the first $750,000 of indebtedness—or $1 million if you bought the home before Dec. 16, 2017
- Charitable contributions up to 60% of AGI
- Medical and dental expenses over 7.5% of AGI
- State and local income, plus either personal property or sales taxes up to IRS threshold
- Gambling losses up to total amount won
- Investment interest
Deductions You Cannot Itemize
- Mortgage interest on loan amounts over $750,000, unless you bought your home before Dec. 16, 2017
- State and local income, sales, and personal property taxes beyond IRS threshold
- Unreimbursed employee expenses
- Tax preparation expenses
- Natural disaster losses unless in a federally declared disaster area
What Does It Mean to Claim Itemized Deductions?
When you file your tax return, you decide between the standard deduction—a fixed amount by filing status—or itemizing your deductions. Itemized amounts vary based on your expenses listed on Schedule A of Form 1040, and you subtract that from your taxable income.
Which Expenses Can I Itemize?
On Schedule A of Form 1040, you can itemize unreimbursed medical and dental expenses, long-term care premiums, home mortgage interest, charitable donations, certain taxes, casualty and theft losses, and some gambling losses.
Who Should Itemize Deductions?
You have the option to itemize or take the standard deduction. If your itemizable expenses exceed the standard deduction, it makes sense to itemize.
What Are the Standard Deduction Amounts for 2024 and 2025?
For singles and married filing separately, it's $14,600 in 2024 and $15,000 in 2025. Heads of household get $21,900 in 2024 and $22,500 in 2025. Married filing jointly: $29,200 in 2024 and $30,000 in 2025.
The Bottom Line
In summary, an itemized deduction subtracts expenses from your AGI to reduce your tax bill. You can itemize or take the standard deduction for your filing status, listing itemized ones on Schedule A of Form 1040, which might include mortgage interest, charitable gifts, and unreimbursed medical expenses.
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