What Are Itemized Deductions?

An itemized deduction is an eligible expense you list on Schedule A of Form 1040 to reduce your adjusted gross income (AGI) and lower your taxable income. Common examples include mortgage interest, charitable contributions, and certain medical expenses. Taxpayers can either itemize deductions or claim the standard deduction for their filing status—whichever results in lower tax liability.

Key Takeaways

• Itemized deductions reduce taxable income and are reported on Schedule A (Form 1040).
• Keep receipts and documentation; the IRS may request proof in an audit.
• Choose to itemize only if your total itemized deductions exceed the standard deduction for your filing status.

How Itemized Deductions Work

Itemized deductions are subtracted from AGI to arrive at taxable income. The tax benefit depends on your marginal tax rate: the higher your rate, the greater the tax savings from each dollar of deduction.

Example: If a single filer has $80,000 gross income and $15,000 in itemized deductions, taxable income becomes $65,000. The taxpayer’s savings on those deductions will reflect their marginal tax bracket.

Keep receipts, bank statements, medical bills, insurance statements, and charitable receipts to substantiate deductions.

Deductions vs. Credits

Deductions reduce taxable income; tax credits reduce the tax owed dollar-for-dollar. For example, a $1,000 credit lowers your tax bill by $1,000, whereas a $1,000 deduction reduces taxable income and thus the tax owed by that amount multiplied by your marginal rate.

Itemized vs. Standard Deduction

Most taxpayers choose between itemizing and taking the standard deduction. The standard deduction amounts include:

• Single or 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)

Nonresident aliens must itemize. If married filing separately, both spouses must choose the same deduction method (both standard or both itemize). Generally, itemize only when your total allowable itemized deductions exceed the standard deduction for your filing status.

What You Can (and Cannot) Itemize

Common deductible expenses and notable limits:

Can itemize
* Mortgage interest on qualified home loans:
* Loans used to buy or substantially improve a home purchased on or after Dec. 16, 2017: interest on up to $750,000 of indebtedness.
* Loans taken out before Dec. 16, 2017: different limits (historically up to $1 million).
* Charitable contributions — generally deductible up to a percentage of AGI (commonly up to 60% for cash gifts, subject to specific rules).
* Medical and dental expenses that exceed 7.5% of AGI.
* State and local taxes (income or sales tax) plus property taxes — combined limit of $10,000 ($5,000 if married filing separately).
* Gambling losses — deductible up to the amount of gambling winnings.
* Investment interest expense — deductible up to net investment income.

Cannot itemize (or limited)
* Mortgage interest on loan amounts above the applicable limits.
* State and local taxes above the $10,000/$5,000 cap.
* Unreimbursed employee business expenses (generally not deductible for most taxpayers).
* Tax preparation fees (generally not deductible for most taxpayers).
* Casualty and theft losses, except for losses in federally declared disaster areas.

Who Should Itemize

Itemize if the total of your allowable itemized deductions exceeds the standard deduction for your filing status. Common situations where itemizing may make sense:

• You pay substantial mortgage interest.
• You made large charitable contributions.
• You incurred high deductible medical expenses (over 7.5% of AGI).
• You paid significant state and local taxes (up to the cap) and property taxes.
• You have deductible investment interest or large gambling losses offsetting winnings.

How to Claim Itemized Deductions

• File Schedule A with Form 1040.
• List each deduction category and calculate totals per IRS instructions.
• Keep documentation: receipts, canceled checks, bank records, medical bills, insurance statements, and written acknowledgment from charities.
• Retain records for several years—IRS recordkeeping guidance recommends keeping documentation in case of audit.

Bottom Line

Itemized deductions can lower your taxable income when their total exceeds the standard deduction for your filing status. Review eligible categories (mortgage interest, charitable gifts, certain medical expenses, state/local taxes within limits, etc.), maintain thorough records, and file Schedule A if itemizing. Choosing the best option—itemize or standard—depends on which yields the lower overall tax liability.