When completing your tax returns, there are some choices that are really difficult. One of them is whether to take the standard deduction or the itemized deduction. Both options lower your tax owed (or the taxable income) but which one is more beneficial depends on one’s finances. It is possible that itemizing does lead to greater tax savings for a mortgage holder, someone with a high unreimbursed medical cost, or a very charitable giver.
This guide focuses on understanding how itemized deductions function, the most frequently incurred deductible expenditures, and when it is more financially beneficial to itemize deductions compared to the standard deduction.
What are Itemized Deductions?
As a filer, itemized deductions represent a certain class of expenses that the IRS enables one to subtract from the total income that is taxable. Rather than being provided with a lump sum one the deductions (the standard deduction), the taxpayer fills Schedule A of the IRS by attaching the specified expenditures one by one. It is possible that the gross total from these deductions would be able to place one’s taxable income at a more beneficial rate than the standard deduction, thus lightening one’s overall tax burden.
Who Would Benefit From Itemization?
- People who pay significant mortgage interest or property taxes.
- People with substantial medical or dental expenses.
- People who live in states with high taxes and significant state and local taxes (SALT).
- People who donate to charity and give substantial amounts during the year.
- People who earn high incomes and have many expenses that can be deducted.
Common Itemized Deductions
The following expenses are the major ones that can be claimed against income on Schedule A:
- Medical and Dental Expenses: You can claim the expenses you incurred on medical and dental services that were not covered by the medical aid scheme and which in total are above 7.5% of your adjusted gross income (AGI). This includes consultations with doctors, hospital accounts, surgeries, prescriptions, and certain medical apparatus.
- State and local taxes (SALT cap explanation): You can claim state and local income and/or sales taxes as well as property taxes, but the total claim cannot exceed $10,000(or $5,000 in the case of married taxpayers who file separately). This is particularly crucial for taxpayers who reside in states with high income taxes.
- Mortgage Interest: A taxpayer is entitled to claim the interest on a mortgage for the taxpayer’s primary residence and/or a secondary residence. This applies to loans not exceeding $750,000 (for mortgages after December 15, 2017).
- Charitable Contributions: The taxpayer is entitled to claim contributions that have been made to a charity, cash or in kind, that is for a registered charity. For bigger contributions, the charity may need to be determined and in some cases an appraisal may be required.
- Personal Casualty & Theft Losses: You may deduct some personal casualty and theft losses arising from federally declared disasters. Theft and casualty losses incurred outside of a federally declared disaster zone are no longer allowable deductions.
- Other Deductions (Very Few): Some unreimbursed employee expenses and investment fees used to be deductible, but most were eliminated by the 2017 tax reform. Only specific cases remain.
Itemized Deductions vs. Standard Deduction
The Standard Deduction amounts as of 2025 are:
- Single or Married Filing Separately: $14,600
- Married Filing Jointly: $29,200
- Head of Household: $21,900
If the itemized deductions you are eligible for exceed these amounts, you will most likely benefit from itemizing.
Example Situations
Consider a married couple with $15,000 in mortgage interest, $10,000 in state and local taxes, and $6,000 in charitable donations. They will itemize their deductions because their total deductions of $31,000 exceed the $29,200 standard deduction.
In the above example, a single filer has:
- $7,000 in SALT and $5,000 in mortgage interest.
- They will take the standard deduction because their itemized total of $12,000 is less than $14,600.
How to Itemize on Your Tax Return
- Keep expense records like receipts and invoices of your medical bills, tax statements, donations, and so on.
- Complete Schedule A (Form 1040) by listing eligible expenses in the appropriate categories.
- Attach to your tax return a completed Schedule A with your Form 1040 and file your taxes.
Filing Tips
If you’re doing your taxes and need a bit of help, tax software is a great way to help you decide whether to take a standard deduction or to itemize your deductions.
Make sure all receipts for donated items to charities are in order and accounted for.
Instead of waiting to track down all of your tax deductible expenses at tax time, track them all throughout the year.
Pitfalls and Limitations
SALT Deductions: Cap on State and Local Taxes is limited to 10 thousand dollars in deductible expenses.
Non-Reimbursed Medical Expenses: Deductible medical expenses remain at 7.5 percent of adjusted gross income.
Phaseouts: Deductions may “phase-out” for individuals with very high income, even without the old Pease limitations in place.
When Seeking a Tax Professional
Talk with Dimov NYC CPA if the following situation apply:
- You have multiple complex deductions
- You are on the line between standard and itemized deductions
- You are looking to mitigate an audit by ensuring full compliance with the IRS regulations.
FAQs
What can I include in itemized deductions?
Common deductions include mortgage interest, state and local taxes (capped at $10,000), charitable contributions, and unreimbursed medical expenses exceeding 7.5% of your AGI.
Is it better to itemize or take the standard deduction?
Itemize only if your total eligible deductions are greater than the standard deduction for your filing status. For 2025, it’s $15,000 (Single), $30,000 (Married Filing Jointly), and $22,500 (Head of Household).
Can I deduct home improvements?
Generally, no. However, medically necessary improvements (like wheelchair ramps) may be deductible as medical expenses if they exceed 7.5% of your AGI.
Are dental and vision expenses deductible?
Yes, if they are unreimbursed and, combined with other medical expenses, exceed 7.5% of your AGI. This includes exams, glasses, and dental treatments.
Can I itemize if I’m married filing separately?
Yes, but both spouses must choose the same method — either both itemize or both take the standard deduction.