Should I Itemize Tax Deductions on My Taxes?

As a taxpayer, there are several strategies you can use to reduce your taxable income and save money. Claiming tax deductions is one of the best ways to lower your tax bill at the end of the year.

Generally, you can choose between claiming the standard or itemized deduction. If you have large expenses that are eligible for a write-off, you’ll likely end up itemizing.

Need help understanding which deduction you should use? Learn more about itemizing tax deductions and how it applies to you.

What are itemized deductions?

Deductions are individual expenses that you can deduct on your tax return. When you claim deductions on your tax return, it reduces your taxable income by the allowed amount of those expenses. But when you’re filing, there are two ways to claim deductions: the standard deduction or the itemized deduction.

Determining whether you should claim the standard vs. itemized deduction depends on the number of eligible write-offs you have. If your eligible deductible expenses exceed the standard deduction amount for your filing status and age, you then should take the itemized deduction.

Keep in mind that there’s also a difference between deductions vs credits. 

Itemized deductions only include deductions, which reduce your taxable income and, in turn, usually lower your overall tax bill. Tax credits are named as such, and directly lower the taxes you owe.

You don’t include tax credits in your calculations when determining whether you should itemize your deductions.

Examples of itemized deductions

Deciding whether you should itemize deductions starts with understanding what you can deduct and taking stock of your itemized expenses.

You can learn more about some of the common types of itemized deductions below.

Charitable contributions

If you donate to qualifying charitable organizations, you can deduct your donation to lower your tax bill. You can use the Tax Exempt Organization Search Tool to determine if the charity you donated to makes you eligible for this deduction.

Taxpayers can generally deduct up to 60% of their adjusted gross income (AGI) in tax-deductible donations.

Mortgage interest

Most homeowners take out a mortgage loan to purchase their homes. The interest you pay on your mortgage loan can be deducted to help you reduce your tax liability at the end of the year.

You can use the 1098 form your lender sends you to figure out how much mortgage interest you paid. If you pay at least $600 in mortgage interest, your lender is required to send Form 1098.

When it comes to taking this deduction, it’s important to note that the limits on your deduction vary based on when you took out the loan:

• If you took on your mortgage before December 16, 2017, you can deduct home mortgage interest on the first $1 million ($500,000 if married filing separately) of your loan balance.
• For loans taken after the above date, you can deduct home mortgage interest on the first $750,000 ($375,000 if married filing separately) of your loan balance.

The mortgage must have been used to buy, build, or substantially improve the property secured by the loan. Cash-out mortgages are not eligible for the deduction.

Medical and dental expenses

Some medical and dental expenses can also be considered itemized deductions, but limitations apply. If your medical or dental expenses exceed 7.5% of your AGI, you may be eligible for a deduction.

You can only deduct the amount of unreimbursed medical or dental expenses that exceed the 7.5% threshold. 

Gambling losses

Whether you’re at the casino, playing the lottery, or betting on sports, you must report any gambling winnings on your taxes. Fortunately, that doesn’t always mean you have to pay taxes on the total amount of gambling winnings.

The IRS allows you to deduct gambling losses up to the amount you received in gambling winnings. This means that you typically don’t have to pay taxes if your gambling losses match the amount of your winnings and you claim itemized deductions.

Be sure to keep records that document your losses.

Income, sales, real estate, and personal property taxes

Various types of taxes can be written off when you claim the itemized tax deduction. There are three categories of deductible taxes:

• State, local, and foreign income taxes (or state and local general sales taxes in lieu of state and local income taxes)
• State and local real property taxes
• State and local personal property taxes

There are also several types of non-deductible taxes, including federal income taxes and Social Security taxes.

Losses from disaster or theft

If you claim the itemized deduction, you may be able to deduct losses related to your home, household items, and vehicles. Losses caused by federally declared disasters are typically eligible for this deduction.

You can also deduct theft losses for your money or property, but the loss is limited to the adjusted basis of your property. This deduction has limitations for tax years 2018 through 2025.

Miscellaneous deductions

In addition to some of the more common itemized deductions, there are several miscellaneous deductions that are often overlooked.

Other examples of miscellaneous tax deductions include unreimbursed job expenses and tax preparation expenses, however, those deductions are not available for tax years 2018 through 2025

When to claim itemized deductions

Determining whether you need to claim the standard or itemized deduction generally comes down to understanding which expenses you’re eligible to write off. Although, there are a few other considerations to take into account.

For instance, you may not be eligible to claim the standard deduction. You can’t claim the standard deduction if:

• You’re married filing separately, and your spouse itemizes deductions
• You’re filing a tax return for a period of less than 12 months because your annual accounting period changed
• You were a nonresident alien or dual-status alien during the year
• You’re filing as an estate or trust, common trust fund, or partnership

If you’re eligible for the standard and itemized deductions, compare the standard deduction to the value of your itemized expenses. If the value of your itemized expenses exceeds the standard deduction, you can save by claiming itemized deductions.

If you’re having difficulty determining which expenses you can write off, a tax professional can help provide some clarity so you can claim the correct deductions.

How to claim itemized deductions on your taxes

When you’re claiming itemized deductions, you need to complete Schedule A in addition to Form 1040. Schedule A is where you list the itemized deductions you are taking. Once it’s complete, attach the Schedule A to your Form 1040 before filing.

TurboTax generates, completes, and attaches Schedule A to your Form 1040 tax return for you if you choose itemized deductions rather than the standard deduction. 

Detailed records of your expenses are essential if you’re claiming the itemized deduction. You can scan or photograph receipts and bills as you receive them. When it’s time to file your taxes, you’ll have all of your records in one convenient folder for easy access.