The amount you are allowed to deduct depends on your filing status and is adjusted for inflation each year. The TCJA roughly doubled the standard deduction starting in The IRS website has information on the current year standard deduction amounts. Instead of taking the standard deduction, you always have the option of itemizing your deductions. This means you individually deduct the actual amounts of certain expenses item by item instead of taking the standard deduction.
This is a lot more work than taking the standard deduction. You have to know what expenses are deductible and keep track of them.
You also need to keep records of your expenses. Cancelled checks or credit card statements are not enough—you need to keep receipts and other bills showing what you spent the money on. Itemized deductions are usually personal in nature, and don't include business expenses. Some of the more common ones are:. The largest of these deductions are those for home mortgage interest, property taxes, and state income tax.
For this reason, homeowners are more likely to itemize, while renters rarely do so. However, most of these expenses cannot be deducted in full. Instead, they are subject to special limitations. The TCJA stiffened the limitations for many of these deductions. Casualty losses are deductible only for losses due to federally declared disasters. Medical expenses are deductible only to the extent they exceed 7.
Moreover, the TCJA eliminated itemized deductions for several types of expenses during through —these include:. You must choose whether to itemize or take the standard deduction each year. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. These choices will be signaled globally to our partners and will not affect browsing data.
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Popular Courses. Part Of. Understanding Tax Breaks. Tax Credits. Tax Deductions. Tax Deductions for Real Estate. Tax Deductions for Retirement Savings. Table of Contents Expand. Standard vs. Itemized Deductions. Purpose of Itemizing. Deductions You Can Itemize. Income Limitations. Remember to Aggregate. The Bottom Line. Key Takeaways Itemized deductions help some taxpayers lower their annual income tax bill more than the standard deduction would provide.
The surviving itemized deductions include several categories like medical expenses, mortgage interest, and charitable donations. Itemizing most often makes sense for higher-income earners who also have a number of large expenses to deduct. Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate.
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It may also include any points, mortgage insurance premiums, and real estate taxes you paid through your mortgage servicer. Tip : Compare your mortgage interest, points, and mortgage insurance premiums to your standard deduction.
If the total is larger than your standard deduction, there's a good chance you would benefit from itemizing. All of the rest of your itemized deductions, including state and local taxes, medical expenses, and charitable donations, are just icing on the cake.
If the total is larger than your standard deduction, you'll likely benefit from itemizing. Add up the money you donated to organizations such as food banks, relief funds, religious organizations, and other nonprofits. If you donated clothing, furniture, and other household items, you can deduct those as well. To do that, you need to determine their value.
One way is to find out what your local thrift store charges for similar items. Or you can use a free software program like ItsDeductible that does the work for you.
Keep in mind the IRS requires you to keep good records to back up your charitable deductions. Not all charitable contributions can be deducted on your tax return. Know what you can and can't claim to maximize your potential tax savings. You can claim an "above-the-line" deduction on Schedule 1. Although medical expenses are deductible, few taxpayers get to deduct them.
That's because you can only deduct costs that exceed 7. The list of deductible medical expenses is long, but some of the more common ones include:. You can also deduct the premiums you pay for health, dental, and vision insurance unless you pay for your coverage through your employer using pretax dollars.
Tip : Before you go through all of your doctors' bills and prescription receipts, multiply your AGI by 7. Taking a minute to do this quick calculation can ensure your time will be well spent. If you suffered property damage due to a federally declared disaster, you might be able to claim a casualty loss deduction. Tip : If you use TurboTax to prepare your return, you just need to answer some simple questions about your loss. The software will calculate your deduction and fill in all of the right forms for you.
Before , there were a lot more miscellaneous itemized deductions, but many were eliminated by the Tax Cuts and Jobs Act. Still, a few miscellaneous itemized deductions are available, including:.
A final, uncommon category of miscellaneous itemized deductions includes unreimbursed employee expenses for individuals in a qualifying job category. Prior to , these deductions could be made by any employee, but now they're only available to certain performing artists, people in the military reserves, individuals with impairment-related work expenses, and fee-based local or state government officials. If you have any of the above expenses, it's worth your time to investigate further.
Taking the standard deduction might be easier, but if your total itemized deductions are greater than the standard deduction available for your filing status, saving receipts and tallying those expenses can result in a lower tax bill. Remember, with TurboTax , we'll ask you simple questions about your life and help you fill out all the right tax forms.
Whether you have a simple or complex tax situation, we've got you covered. Feel confident doing your own taxes. Just answer simple questions about your life, and TurboTax Free Edition will take care of the rest.
For Simple Tax Returns Only. Cost of Taking the Wrong Tax Deductions. What Are Itemized Tax Deductions? Charitable Contribution Tax Deductions. Medical Expenses Tax Deduction Checklist. Which Charitable Contributions are Tax Deductible?
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