Itemized Deductions
Specific deductions claimed on Schedule A in lieu of the standard deduction, including state and local tax, mortgage interest, charitable contributions, and medical expenses.
Detailed Explanation
Schedule A itemized deductions include: state and local taxes (capped under SALT), home mortgage interest (subject to acquisition indebtedness limits), charitable contributions (subject to AGI percentage limits by donee type), medical and dental expenses above 7.5 percent of AGI, casualty and theft losses (federally declared disaster only since TCJA), and certain other miscellaneous items. Most taxpayers take the standard deduction since TCJA significantly increased it. Itemizing typically benefits homeowners in high-tax states with substantial mortgages and charitable givers.
Key Points
- Claimed on Schedule A instead of the standard deduction; you take whichever is larger.
- Main categories: state and local taxes (SALT cap), mortgage interest, charitable gifts, and medical expenses.
- Medical and dental expenses are deductible only to the extent they exceed 7.5% of AGI.
- Casualty and theft losses are deductible only in federally declared disaster areas since TCJA.
- Most taxpayers no longer itemize because the TCJA raised the standard deduction sharply.
Practical Example
A homeowner has $9,500 of mortgage interest, $10,000 of SALT (capped pre-OBBBA), and $6,000 of charitable gifts, totaling $25,500. As a single filer with a $15,000 standard deduction, itemizing the $25,500 saves significantly more, so they file Schedule A.
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Learn about Individual Tax PreparationRelated Terms
Standard Deduction
A fixed dollar amount that reduces taxable income, available to taxpayers who do not itemize deductions on Schedule A.
SALT Deduction (State and Local Tax)
The federal itemized deduction for state and local income, sales, and property taxes, capped at $10,000 ($5,000 for married filing separately) under TCJA, with the cap raised under OBBBA.
Adjusted Gross Income (AGI)
Adjusted Gross Income is your total gross income reduced by specific above-the-line deductions, used as the starting point for calculating your federal taxable income.
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