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What Are Itemized Tax Deductions?

Updated for Tax Year 2022 • December 1, 2022 09:09 AM


OVERVIEW

When it comes to reducing your taxable income, itemizing your deductions can really maximize your tax savings.


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Itemized deductions

When searching for ways to reduce your taxable income, itemizing your deductions can really maximize your tax savings. The benefit of itemizing is that it allows you to claim a larger deduction that the standard deduction. However, it requires you to complete and file a Schedule A with your tax return and to maintain records of all your expenses.

Types of itemized deductions

Itemized deductions include a range of expenses that are only deductible when you choose to itemize. Common expenses include:

  • Mortgage interest you pay on up to two homes
  • Your state and local income or sales taxes
  • Property taxes
  • Medical and dental expenses that exceed 7.5% of your adjusted gross income
  • Charitable donations

For years prior to 2018, itemized deductions also include miscellaneous deductions such as work-related travel and union dues.  Beginning in 2018, these types of expenses are no longer deductible for federal tax, however some states still allow these deductions.

Itemizing requirements

In order to claim itemized deductions, you must file your income taxes using Form 1040 and list your itemized deductions on Schedule A:

  1. Enter your expenses on the appropriate lines of Schedule A.
  2. Add them up.
  3. Copy the total amount to the second page of your Form 1040.
  4. This amount is then subtracted from your income to arrive at the final taxable income number.

Deciding whether to itemize

When deciding whether to itemize, keep in mind that you will be giving up the standard deduction amount. So, after adding up your itemized deductions, make sure your itemized deductions total is greater than the standard deduction amount for your filing status. If it’s not, then you'll most likely pay more in tax if you itemize.

Alternative minimum tax implications

If you are subject to the Alternative Minimum Tax (AMT), some or all of the itemized deductions you claim may be reduced or eliminated. Your medical and dental expenses deduction would be reduced, for example.  The AMT disallows deductions for:

  • Interest on home equity loans.
  • State and local income or sales taxes.
  • Tax preparation fees and unreimbursed employee expenses, starting in 2018.

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