What Expenses Can You Deduct When You Itemize?
Deductible expenses include mortgage interest on up to $750,000 of debt, state and local income or sales taxes and property taxes (combined limit of $10,000), charitable donations to qualified organizations, and unreimbursed medical and dental expenses above 7.5% of AGI. Casualty and theft losses from federally declared disasters also qualify.
When Does Itemizing Make More Financial Sense Than the Standard Deduction?
Itemizing pays off when your qualifying expenses exceed the standard deduction for your filing status. Homeowners with large mortgages, taxpayers in high-tax states, and generous donors most often cross this threshold. Run the numbers both ways — or use tax software — to determine which method saves more each year.
What Records Do You Need to Itemize Deductions?
Keep Form 1098 for mortgage interest, property tax bills, receipts for charitable donations (and written acknowledgment for gifts over $250), and explanation of benefits statements from your insurer for medical costs. The IRS can audit any deduction, so organized documentation is essential for every line item on Schedule A.
Frequently asked questions
Can both spouses itemize if filing separately?
If one spouse itemizes on a married-filing-separately return, the other must also itemize — they cannot take the standard deduction. This rule often makes filing separately less advantageous, so compare outcomes carefully before choosing separate returns.
Is there a limit on itemized deductions?
The Pease limitation that previously reduced itemized deductions for high earners was suspended by the 2017 tax law. The main current cap is the $10,000 SALT limit on state and local taxes. Other individual deduction categories carry their own thresholds, such as the 7.5% AGI floor for medical expenses.