Itemized Deductions

Itemized deductions are the named categories of expenses that the IRS lets you deduct from AGI in place of the flat standard deduction. You report them on Schedule A and take the larger of (a) itemized total and (b) the standard deduction. Post-TCJA, around 10% of US filers itemize.

The five biggest categories:

• Mortgage interest: deductible on up to $750,000 of acquisition debt for a primary or secondary residence (post-2017 originations). HELOC interest is only deductible if used to buy or improve the property.
• State and Local Taxes (SALT): state income tax (or sales tax) plus property tax — capped at $10,000 total under TCJA. The SALT cap is the main reason many high-state-tax filers now take the standard deduction even when they previously itemized.
• Charitable contributions: cash gifts deductible up to 60% of AGI; appreciated securities up to 30% of AGI. Requires documentation.
• Medical expenses: deductible only on the portion that exceeds 7.5% of AGI. So a household with $100k AGI deducts only medical costs above $7,500.
• Casualty and theft losses: federally declared disasters only.

The “bunching” strategy can recover some lost itemizing benefit: instead of giving $10,000 to charity each year (and taking the standard deduction), give $30,000 every three years via a donor-advised fund and itemize in those years only.

Use the federal income tax calculator to compare standard vs itemized.