Each tax year, taxpayers must choose how to reduce their taxable income, and IRS Tax Topic 501 guides this decision by explaining the choice between the standard deduction and itemizing deductions.
The standard deduction is a fixed dollar amount subtracted from your income based on your filing status. For example, in tax year 2023, the standard deduction is $13,850 for single filers and $27,700 for married filing jointly. Most taxpayers take this route because it simplifies filing—no receipts or detailed records are necessary.
Conversely, itemizing deductions means listing your qualifying expenses individually on Schedule A of IRS Form 1040. Common itemized deductions include mortgage interest (see our detailed guide on mortgage interest deductions), state and local taxes paid (with a $10,000 cap on the SALT deduction, learn more at State and Local Tax (SALT) Deduction), charitable donations, medical expenses exceeding 7.5% of your adjusted gross income (AGI), and casualty losses from federally declared disasters.
Taxpayers benefit from itemizing only if the total of these deductions exceeds the standard deduction amount for their filing status. For example, a single filer in 2023 who paid $15,000 in mortgage interest, $3,000 in state taxes, $2,000 in charitable contributions, and $1,000 in medical expenses exceeding the threshold would have $21,000 in itemized deductions—significantly more than the standard deduction amount.
It’s important to maintain thorough documentation, such as receipts and statements, to support itemized deductions. Tax software and IRS worksheets can assist in calculating whether itemizing or the standard deduction saves more money in taxes. Note that the Tax Cuts and Jobs Act of 2017 increased the standard deduction and limited some itemized deductions, leading fewer taxpayers to itemize than in previous years.
Who should consider itemizing?
- Homeowners paying mortgage interest
- Individuals with substantial medical expenses
- Donors who make large charitable contributions
- Taxpayers paying high state and local taxes (up to the SALT cap)
- Victims of federally declared disasters with casualty losses
Common mistakes include:
- Assuming itemizing always results in greater tax savings
- Overlooking deductible expenses such as unreimbursed medical costs
- Failing to keep proper documentation, which could trigger IRS audits
Taxpayers can switch between the two options yearly depending on their financial situation.
Understanding IRS Tax Topic 501 helps you make an informed decision to lower your tax bill legally. For additional information on related topics, visit our resources on Standard Deduction, What Are Itemized Deductions?, and Schedule A (Itemized Deductions).
For official IRS details, see IRS Tax Topic 501 and IRS Publication 501.