What Are Itemized Tax Deductions?

When it comes to reducing your taxable income, itemizing your deductions can really maximize your tax savings.

• Itemized deductions
• Types of itemized deductions
• Itemizing requirements

• Deciding whether to itemize
• Alternative minimum tax implications

Key Takeaways

• If you pay mortgage interest, state and local income or sales taxes, property taxes, or have medical and dental expenses that exceed 7.5% of your adjusted gross income, your itemized deductions may exceed your Standard Deduction.
• To claim itemized deductions, you must file your income taxes using Form 1040 and list your itemized deductions on Schedule A.
• Add up your itemized deductions to make sure your itemized deductions total is greater than the Standard Deduction amount for your filing status. If it’s not, then you'll likely pay more in taxes if you itemize.
• If you’re subject to the Alternative Minimum Tax (AMT), some or all of the itemized deductions you claim may be reduced or eliminated.

Itemized deductions

When searching for ways to reduce your taxable income, itemizing your deductions can really maximize your tax savings. The benefit of itemizing is that it allows you to claim a larger deduction that the Standard Deduction. However, it requires you to complete and file a Schedule A with your tax return and to maintain records of all your expenses.

Types of itemized deductions

Itemized deductions include a range of expenses that are only deductible when you choose to itemize. Common expenses include:

• mortgage interest you pay on up to two homes
• your state and local income or sales taxes
• property taxes
• medical and dental expenses that exceed 7.5% of your adjusted gross income
• charitable donations

For years prior to 2018, itemized deductions also include miscellaneous deductions such as work-related travel and union dues. Beginning in 2018, these types of expenses are no longer deductible for federal tax, however some states still allow these deductions.

Itemizing requirements

In order to claim itemized deductions, you must file your income taxes using Form 1040 and list your itemized deductions on Schedule A:

1. Enter your expenses on the appropriate lines of Schedule A.
2. Add them up.
3. Copy the total amount to the second page of your Form 1040.
4. This amount is then subtracted from your income to arrive at the final taxable income number.

TurboTax Tip:

The Alternative Minimum Tax now disallows deductions for interest on home equity loans, state and local income or sales taxes.

Deciding whether to itemize

When deciding whether to itemize, keep in mind that you will be giving up the Standard Deduction amount. So, after adding up your itemized deductions, make sure your itemized deductions total is greater than the Standard Deduction amount for your filing status. If it’s not, then you'll most likely pay more in tax if you itemize.

Alternative minimum tax implications

If you are subject to the Alternative Minimum Tax (AMT), some or all of the itemized deductions you claim may be reduced or eliminated. Your medical and dental expenses deduction would be reduced, for example. The AMT disallows deductions for:

• interest on home equity loans
• state and local income or sales taxes

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The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

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TurboTax Online: Important Details about Filing Simple Form 1040 Returns

If you have a simple Form 1040 return only (no forms or schedules except as needed to claim the Earned Income Tax Credit, Child Tax Credit or student loan interest), you can file for free yourself with TurboTax Free Edition, or you can file with TurboTax Live Assisted Basic at the listed price. Roughly 37% of taxpayers are eligible.

Examples of situations included in a simple Form 1040 return (assuming no added tax complexity):

• W-2 income
• Interest, dividends or original issue discounts (1099-INT/1099-DIV/1099-OID) that don’t require filing a Schedule B
• IRS standard deduction
• Earned Income Tax Credit (EITC)
• Child Tax Credit (CTC)
• Student loan interest deduction
• Taxable qualified retirement plan distributions

Examples of situations not included in a simple Form 1040 return:

• Itemized deductions claimed on Schedule A, like charitable contributions, medical expenses, mortgage interest and state and local tax deductions
• Unemployment income reported on a 1099-G
• Business or 1099-NEC income (often reported by those who are self-employed, gig workers or freelancers)
• Stock sales (including crypto investments)
• Income from rental property or property sales
• Credits, deductions and income reported on other forms or schedules

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