If your deductible expenses and losses are more than the standard deduction, you can save money by deducting them one-by-one from your income (itemizing).
Itemizing deductions does come with some drawbacks, however. Here are the disadvantages of itemized deductions: Unlike standard deductions, itemizing is a manual process that requires gathering documentation and tallying expenses.
If your expenses throughout the year were more than the value of the standard deduction, itemizing is a useful strategy to maximize your tax benefits. Keep in mind that not all expenses qualify when you itemize. Itemized deductions include products, services, or contributions that have been approved by the IRS.
Certain taxpayers aren't entitled to the standard deduction: You are a married individual filing as married filing separately whose spouse itemizes deductions. You are an individual who was a nonresident alien or dual status alien during the year (see below for certain exceptions)
Here are some big reasons people take the standard deduction instead of itemizing on their tax returns. It's faster. Taking the standard deduction makes the tax-prep process relatively quick and easy, which probably is one reason most taxpayers take the standard deduction instead of itemizing.
Standard deductions have filing limitations.
You won't be able to take a standard deduction in a few scenarios. For instance, if you are married but filing separately, you may not be able to take the standard deduction if your spouse itemizes. The same is true if you are claimed as a dependent on someone else's return.
You should itemize deductions on Schedule A (Form 1040), Itemized Deductions if the total amount of your allowable itemized deductions is greater than your standard deduction or if you must itemize deductions because you can't use the standard deduction.
The loan must be secured by the taxpayer's main home or second home (qualified residence), and meet other requirements. Fully deductible interest. In most cases, you can deduct all of your home mortgage interest.
Other Tax Deductions
Unreimbursed job expenses, such as work-related travel and union dues. Unreimbursed moving expenses if you had to move in order to take a new job (exception: active-duty military moving because of military orders) Most investment expenses, including advisory and management fees.
Who Itemizes? High-income taxpayers are much more likely to itemize than others.
If your standard deduction ends up being less than your itemized deductions, you may want to itemize to save money. On the other hand, if your standard deduction is more than your itemized deductions, taking the standard deduction will save you some time.
You can claim part of your total job expenses and certain miscellaneous expenses. These expenses must be more than 2% of your adjusted gross income (AGI).
You may look for ways to reduce costs including turning to your tax return. Some taxpayers have asked if homeowner's insurance is tax deductible. Here's the skinny: You can only deduct homeowner's insurance premiums paid on rental properties. Homeowner's insurance is never tax deductible your main home.
Types of itemized deductions
mortgage interest you pay on up to two homes. your state and local income or sales taxes. property taxes. medical and dental expenses that exceed 7.5% of your adjusted gross income.
Wealthy family buys stocks, bonds, real estate, art, or other high-value assets. It strategically holds on to these assets and allows them to grow in value. The family won't owe income tax on the growth in the assets' value unless it sells them and makes a profit.
If the total is larger than your Standard Deduction, there's a good chance you would benefit from itemizing. All of the rest of your itemized deductions, including state and local taxes, medical expenses, and charitable donations, are just icing on the cake.
If you paid the premiums for a policy you obtained yourself, (such as through the marketplace) your health insurance premium is deductible when they are out-of-pocket costs.
Some taxpayers choose to itemize their deductions if their allowable itemized deductions total is greater than their standard deduction. Other taxpayers must itemize deductions because they aren't entitled to use the standard deduction.
Some taxpayers choose to itemize their deductions if their allowable itemized deductions total is greater than their standard deduction. Other taxpayers must itemize deductions because they aren't entitled to use the standard deduction.