Itemized Deductions Explained: What You Can Deduct & When It Makes Sense

During tax season, a major decision you will be taking is whether to go with the standard deduction or itemized deductions. Both choices will lower the taxable income, but which one is more beneficial depends on the finances. Individual homeowners with mortgage interest, people with large medical bills, or people that donate a lot to charities will almost always be better off taking the itemized approach.

This guide describes the most common deductible expenses, and when it makes more sense to itemize rather than claim the standard deduction.

What Are Itemized Deductions?

Subtracting the tax-deductible expenses using itemized deductions that the IRS has categorized as Itemized expenses. Instead of taking the flat rate deduction, a taxpayer has to provide separate expenses using IRS Schedule A. The sum of the itemized deductions will most likely reduce the taxable income more than the standard deduction and therefore may lower the tax liability.

Who Will Take Advantage of the Different Forms of Deductions?

• People that hold a mortgage and pay a lot of mortgage interest and property taxes.
• People that pay a lot of money for medical and dental care.
• People that pay taxes in high-tax states that pay a lot of SALT.
• People that Give Their Money Away as Charitable Gifts.
• People that have a high income and a high level of deductible expenditures.

Common Itemized Deductions

The following are the most relevant types of expenditures that can be claimed in Schedule A:

Medical and Dental Expenses: You can claim a deduction of unreimbursed medical and dental expenditures that are above 7.5% of your adjusted gross income (AGI). There are many possible expenses like doctor fees and charges, the hospital, surgical operations, selected surgical prescriptions, and a few medical devices.

State and Local Taxes (SALT): You can deduct the state and local income or sales tax and the property taxes, but the total deduction is limited to $10,000 (5,000 if married filing separately). It can be common for taxpayers in high taxed areas to run into this limit.

Mortgage Interest: People that own a house are able to deduct the interest of the mortgage for the primary and/or secondary home. This usually pertains to loans that are equal or under $750,000 (mortgages taken out after December 15, 2017).

Charitable Contributions: Giving money to a registered charity is one form of paying taxes. For big value donations, it is required to have some sort of documentation and sometimes an appraisal.

Casualty and Theft Losses: Certain losses associated with federally declared disasters may be quantifiable as deductible. Personal theft and losses caused by disasters outside of certain designated zones are no longer quantifiable as deductible.

Miscellaneous Deductions (Limited): Certain unreimbursed expenses and deductible fee associated with investment have been deductible. The remainder have been ascribed to as the new norm subsequent to the 2017 tax reform.

Itemized vs. Standard Deduction

Standard Deduction Amounts (2025)

• Single or Married Filing Separately: $14,600
• Married Filing Jointly: $29,200
• Head of Household: $21,900

If your itemized eligible deductions boast a greater sum than these amounts, it is still more sensible to itemize your deduction.

Example Scenarios

In the case of the couple married, they spent 15,000 in a mortgage, 10,000 dollars in state and local earned money, and 6,000 in donations. The itemized deductions would be, the total deductions in this case are (31,000), the standard in this case is (29,200).

In the same way as with the married couple, the one that was single made 7,000 in taxes salt and 5,000 in mortgages. The standard deduction in this case is (14,600) is given, as the itemized total in the single case is less than this sum. In this case 12,000.

Itemized Deductions

Itemized deductions are claimed by accomplishing a certain process. First, one needs to gather relevant documentation that contains vital receipts in the form of pens, medical receipts, bills, donation receipts, and tax donation slips. Form A of the 1040 needs to be filled next, detailing the expenses. They are then to be itemized and the tax form, 1040 is to be submitted.

How to Itemize on Your Tax Return

• Make tax season easier by using tax software that compares both standard and itemized tax returns for you.
• Taxpayers need to prove charitable contributions were made by ensuring that proper acknowledgement documents are retained.
• Don’t neglect to keep track of deductible expenses incurred within a tax year. Make it a habit to keep track of paperwork throughout the year so that you are not scrambling during tax season.

Pitfalls and Limitations

Tax returns and the SALT Cap: All taxpayers are limited to a deduction of $10,000 for state tax.

With regards to medical expenses, the IRS only allows amounts in excess of 7.5% of AGI (adjusted gross income) to be deducted.

Although the old Pease limitations were repealed over a decade ago, you should be aware that some deductions may still phase out for extremely high income earners.

When to Talk to a Tax Professional

Talk with Dimov Tax if you face all of the issues mentioned below:

• You have complex deductions (rental properties, multiple state taxes, or large donations).
• You’re close to the itemized vs. standard deduction threshold.
• You want to reduce audit risks by ensuring compliance and proper documentation.

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