TurboTax / Tax Calculators & Tips / All Tax Guides / Tax Deductions and Credits / How to Maximize Your Itemized Tax Deductions

How to Maximize Your Itemized Tax Deductions

Updated for Tax Year 2015


OVERVIEW

Since you can decide every year whether you want to take the standard deduction or not, careful tax planning can help you maximize your deductions in years you itemize.


Many of your everyday expenses can be itemized as deductions on your income tax return, saving you lots of money at tax time. However, unless you have a large amount of qualifying expenses, you might be better off taking the standard deduction, as most taxpayers do. Since you can decide every year whether you want to take the standard deduction or not, careful tax planning can help you maximize your deductions in years you itemize.

Categorize deductions

Only certain expenses can be classified as itemized deductions. To maximize your deductions, you'll have to have expenses in the following IRS-approved categories:

  • Medical and dental expenses
  • Deductible taxes
  • Home mortgage points
  • Interest expenses
  • Charitable contributions
  • Certain miscellaneous expenses
  • Casualty, disaster and theft losses
  • Non-reimbursed employee business expenses including:
    • Business use of home
    • Business use of car
    • Business travel expenses
    • Business entertainment expenses
  • Educator expenses

Your expenses in certain categories must cross various thresholds in order to itemize. For example, your medical and dental expenses are only deductible to the extent they exceed 10 percent of your adjusted gross income. Non-reimbursed employee expenses must exceed 2 percent of your AGI before they become deductible.

There is a temporary exemption from Jan. 1, 2013 to Dec. 31, 2016 for individuals age 65 and older and their spouses. If you or your spouse are 65 years or older or turned 65 during the tax year you are allowed to deduct unreimbursed medical care expenses that exceed 7.5% of your adjusted gross income. The threshold remains at 7.5% of AGI for those taxpayers until Dec. 31, 2016.

Bunching deductions

Bunching your deductions can maximize the value you get out of them, particularly in categories where you have to cross a minimum threshold. For example, if you have medical expenses every year that equal 5 percent of your AGI, you'll never get to itemize those deductions. If you can push any of those regular expenses into the following year, you'll have 10 percent of your AGI in expenses in one year, instead of 5 percent. In that scenario, 2.5 percent of those expenses may become deductible.

Spend when itemizing

If you intend to itemize in any given year, it makes sense to generate as much spending as possible in deductible categories to get the maximum effect. While spending just to generate a deduction isn't advisable, if you've been holding off on certain purchases, it makes more sense to make those purchases during a year in which you itemize. For example, if you have been delaying certain medical treatments, you'll get more mileage out of your deductions if you spend that money in a year when you're already over the 7.5 percent medical deduction threshold.

Follow a checklist

If you take certain deductions every year, you might get in the habit of overlooking other available options. Keeping a checklist of available deductions can help you unearth both one-time and everyday expenses that you can actually deduct.

For example, if you have gambling losses, you can deduct those up to the extent of your gambling winnings. Subscribing to a magazine or joining a professional society may also be deductible expenses. You might regularly take deductions for charitable contributions, but you can also usually deduct your mileage expense for any travel to and from a charity.

Get every deduction you deserve

TurboTax Deluxe searches more than 350 tax deductions and credits so you get your maximum refund, guaranteed.

For only $54.99$34.99*
Start for Free

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.


Security is built into everything we do
Here's how
* Important Offer Details and Disclosures
  • Try for Free/Pay When You File: TurboTax online and mobile pricing is based on your tax situation and varies by product. Free 1040EZ/A + Free State offer only available with TurboTax Federal Free Edition; Offer may change or end at any time without notice. Actual prices are determined at the time of print or efile and are subject to change without notice. Savings and price comparisons based on anticipated price increase expected 3/18/16. Special discount offers may not be valid for mobile in-app purchases.
  • TurboTax CD/Download products: Price includes tax preparation and printing of federal tax returns and free federal efile of up to 5 federal tax returns. Additional fees apply for efiling state returns. E-file fees do not apply to New York state returns. Savings and price comparison based on anticipated price increase expected 3/18/16. Prices subject to change without notice.
  • Anytime, anywhere: Internet access required; standard message and data rates apply to download and use mobile app.
  • Fastest refund possible: Fastest tax refund with efile and direct deposit; tax refund timeframes will vary.
  • Pay for TurboTax out of your federal refund: A $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice.
  • About our TurboTax Product Experts: Customer service and product support vary by time of year.
  • About our credentialed tax experts: Live tax advice service is available via phone for your toughest tax questions; fees may apply. Service, experience levels, hours of operation and availability vary, and are subject to restriction and change without notice. Not available for TurboTax Business customers.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2014 TurboTax products.
  • Most Popular: TurboTax Deluxe is our most popular product among TurboTax Online users with more complex tax situations.
  • Benefit Assist: After you file, TurboTax automatically shows you a full list of government benefits you may qualify for, like Food Stamps or reduced phone & utilities. Plus, we help you apply, saving you time and making it easier than ever to get more money! Estimate based on calculation of Benefit Assist users from tax year 2013 and published reports of average benefit and savings amounts from federal and state programs. Benefit Assist users who received one or more federal or state benefits received on average $576 (based on survey March-June 2015). Actual amounts and qualifications based on your individual situation; some individuals will not qualify. Feature may not be available for all customers.