Overview

Itemized deductions let you reduce taxable income by reporting eligible out‑of‑pocket expenses on Schedule A (Form 1040). Instead of taking the fixed standard deduction, you list qualifying expenses such as mortgage interest, certain medical costs, state and local taxes (SALT), and charitable donations. Itemizing can produce substantial tax savings for homeowners, people with large medical bills, and donors — but it also requires supporting documentation and awareness of limits and phase‑outs.

Sources and further reading: IRS instructions for Schedule A (Form 1040) and related publications (see https://www.irs.gov/forms-pubs/about-schedule-a and https://www.irs.gov/publications/p502).

Core categories of itemized deductions

  • Mortgage interest: Interest on acquisition indebtedness is generally deductible subject to loan and acquisition-date limits (see IRS guidance on home mortgage interest) (https://www.irs.gov/publications/p936).
  • Medical and dental expenses: Deductible only to the extent they exceed 7.5% of your adjusted gross income (AGI) in the tax year (IRS Publication 502: Medical and Dental Expenses) (https://www.irs.gov/publications/p502).
  • State and local taxes (SALT): Includes state and local income taxes or sales taxes and property taxes, combined and capped at $10,000 ($5,000 if married filing separately) under current tax law (Tax Cuts and Jobs Act rules as explained by the IRS).
  • Charitable contributions: Gifts to qualified organizations are deductible when properly substantiated; limits and special rules apply for noncash gifts and large donations (IRS Publication 526) (https://www.irs.gov/publications/p526).
  • Casualty and theft losses: Generally limited to federally declared disaster areas; otherwise not deductible after the Tax Cuts and Jobs Act changes.
  • Other deductions reported on Schedule A: Includes certain unreimbursed casualty losses, investment interest (limited), and some relatively uncommon items (see Schedule A instructions).

How to decide: standard deduction vs. itemizing

Each year you choose whichever yields a larger deduction. The standard deduction is a single number based on filing status; itemizing is a sum of individual deductible expenses. If itemized deductions total more than the standard deduction for your filing status, itemizing reduces taxable income more.

Quick decision steps I use in practice:

  1. Estimate your year’s deductible items (mortgage interest, SALT, charitable gifts, medical expenses above 7.5% of AGI, investment interest).
  2. Compare the sum to the standard deduction for your filing status for the relevant tax year (consult IRS Topic 501 or current year guidance).
  3. If your itemized total exceeds the standard deduction, complete Schedule A and keep organized documentation.

Tip from practice: many taxpayers who purchased homes or incurred large unreimbursed medical expenses find itemizing beneficial. Conversely, younger filers without mortgage interest or big medical/donation items often are better off taking the standard deduction.

Important limits and pitfalls to watch

  • SALT cap: The $10,000 cap on state and local taxes is a key limit that affects many homeowners and high‑tax state residents (IRS guidance and widespread tax-reform changes).
  • Mortgage interest limits: Interest on acquisition debt is capped (rules depend on the date the mortgage was originated and whether you used proceeds to buy, build, or substantially improve your home). See IRS details on home mortgage interest limits.
  • Medical expenses threshold: Only medical and dental costs that exceed 7.5% of AGI are deductible — so you need substantial out‑of‑pocket costs before seeing a benefit.
  • Documentation rules: Charitable donations require written records. Noncash donations over certain thresholds require appraisal or Form 8283.
  • Mixed-purpose expenses: Home repairs and maintenance are not deductible; only specific home-related interest, taxes, or qualified casualty losses may be.

Common taxpayer mistakes I’ve seen: claiming personal living costs as deductible, failing to include proper substantiation for donations, and misclassifying capital improvements as deductible expenses. For frequently missed items and documentation tips, see our guide on Common Mistakes That Lose You Itemized Deductions.

Recordkeeping: what to keep and for how long

  • Mortgage interest statements (Form 1098) — save for at least three years.
  • Receipts and bank records for charitable contributions and noncash donations.
  • Medical bills, Explanation of Benefits (EOBs), and cancelled checks for medical payments.
  • Property tax bills and state/local tax payment records.
  • Appraisals or Form 8283 for noncash gifts exceeding IRS thresholds.

IRS recommended retention: Generally keep tax records for at least three years from the date you file, but keep records longer when they support items that carry longer statute-of-limitations rules (e.g., unreported income or large basis calculations). See IRS guidance on recordkeeping.

For practical workflows, I recommend scanning documents monthly and storing them in a secure cloud folder labeled by year and category. This makes it easier to assemble Schedule A when tax season arrives.

Strategies that commonly change the math

  • Bunching: Combine charitable contributions, medical expenses, or deductible payments into one tax year to push itemized totals above the standard deduction. Bunching often works well for taxpayers whose deductions hover near the standard deduction. Read more about timing strategies in our piece on Bunching Strategies for Itemized Deductions: When They Work.

  • Prepay property taxes or mortgage interest: Some taxpayers prepay allowable state/local taxes or make an extra mortgage payment in December to increase a single year’s itemized total. Be careful: prepayments must comply with IRS rules and state law and can’t exceed deductibility limits.

  • Use donor-advised funds: For charitable donors who want to bunch deductions while distributing gifts over time, donor‑advised funds allow one large deduction the year you contribute to the fund while grants can go to charities later.

  • Plan medical procedures: If you’re near the 7.5% AGI threshold for medical expense deductibility, consider timing elective procedures or prescriptions to concentrate expenses in one calendar year. Consult providers and advisors before scheduling for tax reasons alone.

For guidance on grouping medical expenses to maximize deduction thresholds, see our guide on When to Bundle Medical Expenses to Maximize Deductions.

Examples (illustrative)

  • Homeowner with mortgage interest and SALT: A married couple with mortgage interest of $10,000 and property taxes plus state income tax of $12,000 will be limited on the SALT portion to $10,000 but can still claim the mortgage interest; compare combined total to the standard deduction for filing jointly.

  • Medical expenses: A single filer with AGI of $80,000 has 7.5% AGI = $6,000. Only medical expenses above that threshold are deductible, so $12,000 in medical bills yields a deductible portion of $6,000.

These examples are simplified. For exact numbers, consult the current year IRS schedules and, if needed, a tax professional.

State differences and conformity

State tax codes differ: some states follow federal rules for itemized deductions; others disallow certain federal deductions or have separate thresholds. It’s important to check your state’s rules or consult a state‑licensed tax preparer. See our glossary entry on How State Conformity Decisions Affect Itemized Deductions for examples.

When to consult a professional

I recommend working with a CPA or enrolled agent if you have any of the following:

  • High home equity or recent home purchase with large mortgage interest.
  • Significant noncash charitable donations or a donor‑advised fund.
  • Large, irregular medical expenses near the AGI threshold.
  • Complex state tax situations or multi‑state income.

In my practice, running a two‑scenario comparison (standard deduction vs. itemized) with a tax projection often uncovers opportunities lost when taxpayers default to the standard deduction without checking numbers.

Final checklist before filing

  • Total your probable Schedule A deductions and compare to the standard deduction.
  • Verify you have documentation for each item (Form 1098, receipts, appraisals, EOBs).
  • Confirm SALT payments are within the $10,000 cap.
  • Check for any unique limits (mortgage origination date, AGI-based phaseouts).

Professional disclaimer

This article is educational and not personalized tax or legal advice. Tax rules change and can be complex; consult the IRS website (https://www.irs.gov) and a qualified tax professional for guidance specific to your situation.

Authoritative sources