Itemized deductions

Also called Schedule A deductions

Specific eligible expenses, such as mortgage interest and charitable gifts, listed on a tax return instead of taking the standard deduction.

What it means

Itemizing means adding up eligible expenses and deducting the total rather than the standard deduction. Common itemized deductions include mortgage interest, state and local taxes (subject to a cap set by law), charitable contributions and medical expenses above a share of AGI. Each category has its own rules and limits, and those limits change with tax legislation.

Itemizing only helps when the total is larger than the standard deduction. It requires recordkeeping, such as receipts, acknowledgments for donations and lender statements, and it is reported on a separate schedule of the federal return. States may have different rules.

Example

For example, suppose a homeowner has $7,000 of mortgage interest, $4,000 of deductible state and local taxes and $2,000 of charitable gifts, totaling $13,000. If their standard deduction were a hypothetical $10,000, itemizing would lower taxable income by $3,000 more.

How it’s used

Homeowners with large mortgage interest
Large charitable donors
Households with very high medical expenses

Strengths and weaknesses

Strengths

Can reduce taxable income more than the standard deduction
Rewards specific expenses such as charitable giving

Weaknesses

Requires detailed records and more complex filing
Many deductions have caps or income-based limits
Only worthwhile when the total beats the standard deduction

Educational information only, not financial, tax or legal advice. Rules, limits and rates change; check the IRS, your lender or plan, or a qualified professional before acting.