Lower your tax bill with itemized deductions

Taxes are one of the biggest expenses individuals face every year. In fact, Americans paid over $2.2 trillion in individual income taxes in 2024, according to the US Department of the Treasury. 

While paying taxes is unavoidable, the way you file can make a major difference in how much you keep. One strategy that can help reduce your tax bill is itemized deductions.

Instead of accepting the standard deduction, you can choose to itemize your eligible expenses. If those expenses exceed the standard deduction, you end up with a lower taxable income, and therefore a lower tax bill.

Understanding how itemized deductions work can help you make informed decisions when filing your taxes.

This guide explains what these deductions are, how they differ from the standard deduction, the most common examples, and how to apply them to your taxes.

What are itemized deductions?

Itemized deductions allow you to reduce your taxable income by claiming certain expenses. This can make a big difference in the amount of tax you owe.

Some of these deductions are pretty straightforward, like the interest you pay on your mortgage or the money you donate to a charity. The key is that these deductions must be legitimate, documented, and fall within IRS guidelines.

Every year, taxpayers face a choice: Take the standard deduction or itemize their deductions. You cannot do both. The decision depends on which option lowers your taxable income the most.

Itemized deductions vs Standard deductions

The IRS also sets a standard deduction, which is a predetermined, flat figure that you can subtract from your gross income to lower your overall tax liability.

For the 2025 tax year, the standard deduction is:

• $15,000 for single filers
• $22,500 for heads of household
• $30,000 for married couples filing jointly

The standard deduction simplifies filing because you do not need to provide records or receipts. However, if your qualified deductible expenses exceed the standard deduction, itemizing becomes more advantageous.

For example, if you are a single filer and your deductible expenses add up to $18,000, itemizing saves you more money compared to the $14,600 standard deduction.

6 Common examples of itemized deductions

The IRS allows several types of expenses to qualify as itemized deductions. Not all taxpayers will have the same deductions, but these are the most common categories:

1. Medical and dental expenses

You can deduct unreimbursed medical expenses that exceed 7.5% of your adjusted gross income (AGI). This includes doctor visits, surgeries, prescriptions, medical equipment, and some long-term care services.

2. State and local taxes (SALT)

Taxpayers can deduct state and local income, sales, or property taxes. However, there is a cap of $10,000 ($5,000 if married filing separately). This limitation makes SALT deductions less impactful for taxpayers in high-tax states but still valuable for many.

3. Mortgage interest

Homeowners can deduct interest paid on mortgages up to $750,000 of indebtedness ($375,000 if married filing separately). This tax deduction is considered a key incentive for home ownership.

4. Charitable contributions

Donations to qualified charities are deductible. This includes cash contributions, as well as donations of goods, property, or even appreciated assets like stocks. The deduction amount depends on your AGI and the type of donation.

5. Casualty and theft losses

If you suffer property damage from a federally declared disaster, you may deduct casualty and theft losses that exceed certain thresholds.

6. Miscellaneous deductions

Certain job-related expenses, gambling losses (up to winnings), and investment expenses may qualify. While these are less common, they can still add value for specific taxpayers.

These deductions can add up quickly, especially for homeowners, individuals with high medical expenses, or those who regularly contribute to charities.

How do you itemize deductions?

Itemizing deductions takes more effort than claiming the standard deduction, but the potential savings make it worthwhile for many taxpayers.

Here are the steps:

1. Gather documentation

Collect receipts, invoices, bank statements, or any proof of deductible expenses. The IRS requires records to support each deduction in case of an audit.

2. Use Schedule A (Form 1040)

Itemized deductions are reported on Schedule A, which accompanies your tax return. Schedule A lists categories such as medical expenses, taxes, interest, and contributions.

3. Calculate totals

Add up each category of expenses and apply any thresholds or limits. For example, only medical expenses exceeding 7.5% of AGI are deductible, and SALT deductions cannot exceed $10,000.

4. Compare with the standard deduction

After calculating your total itemized deductions, compare them with the standard deduction amount for your filing status. Choose the higher figure to maximize savings.

5. File with supporting documents

While you do not send all receipts with your tax return, you must keep them for your records in case the IRS requests verification.

How to apply itemized deductions to your taxes

Applying itemized deductions to your taxes is about more than just listing expenses—it requires strategy.

Here are ways to make the most of them:

1. Plan charitable giving. If your itemized deductions fall slightly below the standard deduction, consider bunching donations. This means concentrating charitable contributions in one tax year to push your deductions above the threshold.

2. Track medical expenses carefully. Because only expenses over 7.5% of AGI are deductible, it may help to schedule elective procedures within the same year to maximize deductions.

3. Understand mortgage interest benefits. New homeowners often benefit from itemizing because early mortgage payments consist mostly of interest. If you own property, keep detailed mortgage interest statements (Form 1098) for accurate reporting.

4. Monitor SALT deductions. With the $10,000 cap in place, review your property tax and state income tax payments carefully. In high-tax states, this deduction may still represent a significant portion of your itemized total.

5. Use professional guidance. Tax laws change frequently. A qualified tax professional can help ensure you take advantage of every eligible deduction while avoiding mistakes.

Itemized deductions are one of the most effective ways to lower your taxable income and keep more of your money. While the standard deduction is simpler, it may not always be the best option if your expenses are substantial.

By understanding how itemized deductions work, keeping accurate records, and applying strategies like bunching donations or timing medical expenses, you can make the most of your tax return.

The key takeaway is simple: do the math each year. Compare your itemized deductions with the standard deduction to see which option benefits you most.

Every dollar matters, so making smart decisions about itemizing could mean significant tax savings.