Itemized Deductions Explained: What You Can Deduct & When It Makes Sense

When filing your taxes, one of the biggest decisions you’ll make is whether to claim the standard deduction or choose itemized deductions. Both approaches reduce your taxable income, but the right choice depends on your financial situation. Homeowners with mortgage interest, individuals with significant medical expenses, or generous charitable donors may find that itemizing leads to more tax savings.

This guide breaks down how itemized deductions work, the most common deductible expenses, and when it makes sense to itemize instead of taking the standard deduction.

What Are Itemized Deductions?

Itemized deductions are specific expenses the IRS allows you to subtract from your taxable income. Instead of taking a flat deduction (the standard deduction), you list eligible expenses individually on IRS Schedule A. The total of these deductions may reduce your taxable income more than the standard deduction, lowering your tax liability.

Who Might Benefit from Itemizing?

• Homeowners paying significant mortgage interest or property taxes
• Individuals with large medical or dental bills
• Taxpayers in high-tax states where state and local taxes (SALT) are substantial
• Charitable donors who give generously throughout the year
• High-income earners with diverse deductible expenses

Common Itemized Deductions

Here are the main categories of expenses you can include on Schedule A:

1. Medical and Dental Expenses

You can deduct unreimbursed medical and dental expenses that exceed 7.5% of your adjusted gross income (AGI). This includes doctor visits, hospital bills, surgeries, prescriptions, and certain medical equipment.

2. State and Local Taxes (SALT)

You may deduct state and local income or sales taxes, plus property taxes, but the total deduction is capped at $10,000 ($5,000 if married filing separately). This limit is especially important for taxpayers in high-tax states.

3. Mortgage Interest

Homeowners can deduct interest paid on a mortgage for a primary or secondary residence. Generally, this applies to loans up to $750,000 (for mortgages taken after December 15, 2017).

4. Charitable Contributions

Donations to qualified charities, whether cash or property, are deductible. For larger gifts, documentation or appraisals may be required.

5. Casualty and Theft Losses

Losses from federally declared disasters may qualify as deductible. Personal theft and casualty losses outside of disaster zones are no longer deductible.

6. Miscellaneous Deductions (Limited)

Some unreimbursed employee expenses and investment fees used to be deductible, but most were eliminated by the 2017 tax reform. Only specific cases remain.

Itemized vs. Standard Deduction

Current Standard Deduction Amounts (2025)

• Single or Married Filing Separately: $14,600
• Married Filing Jointly: $29,200
• Head of Household: $21,900

If your eligible itemized deductions exceed these amounts, itemizing is often the smarter choice.

Example Scenarios

• A married couple with $15,000 in mortgage interest, $10,000 in state and local taxes, and $6,000 in charitable donations would itemize because their total deductions ($31,000) exceed the $29,200 standard deduction.
• A single filer with $7,000 in SALT and $5,000 in mortgage interest would take the standard deduction since their itemized total ($12,000) is less than $14,600.

How to Itemize on Your Tax Return

1. Gather Documentation – Keep receipts, medical bills, tax statements, and donation records.
2. Complete Schedule A (Form 1040) – List eligible expenses in the proper categories.
3. Attach to Your Tax Return – File with your Form 1040 when submitting taxes.

Filing Tips

• Use tax software to compare standard vs. itemized automatically.
• Double-check charitable contribution documentation.
• Track deductible expenses throughout the year, not just at tax time.

Pitfalls and Limitations

• SALT Cap: Limited to $10,000 in deductions.
• Medical Expense Floor: Only amounts over 7.5% of AGI qualify.
• Phaseouts: While the old Pease limitations were repealed, some deductions may still phase out for very high earners.

When to Talk to a Tax Professional

You may want expert guidance if:

• You have complex deductions (rental properties, multiple state taxes, or large donations).
• You’re close to the itemized vs. standard deduction threshold.
• You want to reduce audit risks by ensuring compliance and proper documentation.

Maximize your tax savings with the right deductions—contact Watter CPA today for expert guidance on itemized deductions and personalized tax strategies.

FAQs

• What can I include in itemized deductions?
• Is it better to itemize or take the standard deduction?
• Can I deduct home improvements?
• Are dental and vision expenses deductible?
• Can I itemize if I’m married filing separately?