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What are itemized deductions?

Key takeaways

  • When you file your tax return, you can either itemize—that is, deduct eligible expenses from your taxable income—or take a flat standard deduction.
  • Possible itemized deductions include home mortgage interest, charitable donations, and state and local taxes.
  • The standard deduction is the same for all eligible taxpayers with the same filing status, except for those who are blind and/or at least age 65, who get a higher amount.
  • Itemizing could be a good idea if your eligible expenses add up to more than the standard deduction for your filing status.

When you prepare your federal tax return, the IRS gives you a choice: You can claim a standard deduction—a set amount available to all eligible taxpayers—or you can itemize your eligible expenses and deduct that total instead. Both deduction types reduce your taxable income and how much you owe the government as a result. But you can use only one deduction option each year. Here are some considerations for making that decision.

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What are itemized deductions?

Itemized deductions are a list of expenses you could claim on your tax return to reduce your taxable income. State and local taxes, charitable donations, and home mortgage interest are a few of the major expenses you may be able to deduct when you file your federal tax return.

When you itemize, you add up the value of all eligible deductible expenses. Then, you deduct that amount from your taxable income. For example, if your adjusted gross income (AGI) before deductions is $75,000 and you have $15,000 in eligible itemized deductions, your taxable income, if you itemize, would be $60,000 ($75,000 minus $15,000).

Standard deduction vs. itemized

If you don’t itemize, your other option is to take the standard deduction, unless you’re a nonresident alien or married filing separately while your spouse is itemizing. In those cases, you can’t claim the standard deduction. But most other taxpayers may claim the standard deduction, regardless of their expenses that year. The amount you may claim is based almost entirely on your filing status. For tax year 2023, the standard deductions are as follows:

  • Single filer: $13,850
  • Head of household: $20,800
  • Married filing jointly: $27,700

One exception: You receive a higher standard deduction than others in your filing status if you’re blind and/or age 65 or over.

If you take the standard deduction, you can’t itemize. In that case, your charitable donations, home mortgage interest, and other itemizable deductions wouldn’t have any impact on your taxable income or tax bill.

What can be itemized as deductions?

There are a few major categories of expenses that can be itemized as deductions—and subcategories within those.

Medical and dental expenses. You might be able to deduct qualified medical and dental expenses that you paid out of pocket. This could include office appointments, as well as prescriptions, diagnostic tests, and hospital care. You could also deduct your insurance premiums, but only if you’re not paying for them with pre-tax contributions that come directly out of your paychecks.

One thing to note is you can deduct only health care expenses over 7.5% of your AGI. Say, for instance, your AGI is $100,000. Then, the first $7,500 of medical and dental expenses would not be deductible, but anything you spent over this limit during that tax year would be.

State and local taxes. You’ve likely paid state or local taxes of some kind throughout the year. When you itemize, you can deduct up to $10,000 of those per year (or $5,000 if you’re married filing separately). One catch: You can deduct either state and local income taxes or state and local sales taxes. You can’t deduct both.

How do you decide? You could check your W-2 for the exact amount of state and local income taxes taken from your paychecks, or add up receipts if you made quarterly estimated tax payments. Next, use the IRS' optional state sales tax tables or their sales tax deduction calculator to determine how much you can deduct in state and local sales tax—or do the math if you kept track of every single purchase throughout the year. Then, compare the state and local income taxes you’ve paid to the state and local sales taxes you’ve paid. The bigger the number, the bigger the potential tax benefit if you deduct that tax type.

Home mortgage interest. If you have a mortgage on your home, you might be able to deduct at least some of the interest paid on the loan. That amount depends on when you purchased the property. If you bought your home on December 15, 2017 or earlier, you can deduct interest on a mortgage up to $1 million. (Homeowners who are married filing separately can each deduct interest on up to $500,000 of a mortgage for a property bought on or before December 15, 2017.) If you bought after December 15, 2017, you can deduct interest on a mortgage up to $750,000. (Homeowners who are married filing separately can each deduct interest on up to $375,000 of a mortgage for a property bought after December 15, 2017.)

Gifts to charity. If you give cash or property to a charitable, religious, educational, or other qualified organization, you could deduct the value of your donation. For cash contributions, you typically can deduct up to 60% of your AGI.

Losses in a disaster area. You could also deduct any losses from damage or theft if you live in an area impacted by a federally declared disaster.

Other itemized deductions. The IRS allows a few other possible deductions, such as for gambling losses and the losses on certain types of bonds. Tax laws change frequently, so new deductions could be added while others could go away in the future. Limits on how much you can deduct might change too. Consider consulting a tax professional before you itemize.

When does it make sense to itemize vs. claim the standard deduction?

If you’re allowed to itemize or take the standard deduction, calculate which would be larger to get the biggest tax benefit. For instance, if you’re single and your eligible itemized expenses are more than the $13,850 standard deduction, itemizing would make more sense. If the total is less, taking the standard deduction is likely a better option. Married couples filing jointly would need to see whether their eligible itemized deductions add up to more than $27,700 for the year before deciding whether to itemize vs. claim the standard deduction.

Since the standard deduction is so high, about 90% of filers use the standard deduction vs. itemizing, according to the IRS.1 Another potential reason taking the standard deduction is so common: Itemizing deductions takes more work because you need to track your expenses throughout the year and add them up. Some situations where it might be worth the effort to itemize include the following:

  • You own a home and your annual mortgage interest, real estate taxes, mortgage insurance premiums, and points, if you have them, total more than the standard deduction.
  • You racked up a lot of expensive medical bills.
  • You made sizable donations to qualified charitable organizations.
  • You live in an area with high state and/or local income and/or sales taxes.

Keep in mind: You can change your deduction choice every year. If you take the standard deduction this year, you can still itemize next year if that leads to a better result then, and vice versa.

How to claim itemized deductions

  • Track your itemizable deductions during the year. You’ll need to know how much you spent in each possible category when you prepare your taxes.
  • Fill out Schedule A for your tax return. This form lists categories of itemizable deductions and gives you instructions for correctly totaling them. After completing the form, you’ll know how much you could deduct by itemizing.
  • Compare your itemized deductions total against the standard deduction for your filing status. It only makes sense to claim itemized deductions if they add up to more than the standard deduction. If your itemized deductions add up to less than the standard deduction, you’d owe less in taxes by taking the standard deduction.
  • Enter the itemized deduction amount as you complete your tax return. This information goes on Form 1040.
  • Get help from tax software or a tax pro. If you’re worried about how to itemize deductions properly, a tax preparer or tax software could handle the calculations for you.
  • Keep records of your deductions. If you’re audited, you might need to submit proof of expenses you deducted. You should hold onto receipts for 3 years, which is generally as far back as the IRS would audit past returns.

Is there a limit to the number of deductions you can claim?

There isn’t a maximum number of deductions you can claim when you itemize. However, the deductions themselves could have dollar amount limits.

For example, the home mortgage interest deduction only applies to the first $750,000 of your mortgage debt for homes purchased after December 15, 2017. Interest paid on mortgage debt over the $750,000 limit isn’t deductible.

The state tax deduction makes you choose between deducting your state and local income tax payments or your state and local sales tax payments. You can deduct either one, but not both, and only up to $10,000. Every deduction has its own set of rules and restrictions which you should review, either by looking at or with your tax preparer.

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1. "IRS issues guidance on state tax payments,", August 30, 2023.

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