Itemized Deduction

Itemized deductions are specific expenses allowed by the IRS that taxpayers can subtract from their adjusted gross income to reduce their taxable income. Taxpayers choose between itemizing or taking the standard deduction, whichever provides a greater benefit.

Common itemized deductions include mortgage interest, state and local taxes (SALT, capped at $10,000), charitable contributions, medical expenses exceeding 7.5% of AGI, and casualty and theft losses from federally declared disasters. The Tax Cuts and Jobs Act of 2017 significantly increased the standard deduction, reducing the number of filers who benefit from itemizing.

Strategic use of itemized deductions can substantially reduce your tax bill. Techniques include bunching charitable contributions into a single year, timing medical procedures, and maximizing deductible expenses in years when you exceed the standard deduction threshold.