Advertiser Disclosure

How To Itemize Deductions Like a Tax Pro

April 26, 2021

4 min Read

Written by Michael Keenan

Edited by Levi Leidy

Young disabled freelance worker working on a computer while being with his dog at home.

Drazen Zigic / Getty Images/iStockphoto

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

One of the biggest choices you face when you file your income tax return is whether to claim the standard deduction or to itemize in order to minimize your IRS payment. Some examples of itemized deductions are home mortgage interest, state and local income taxes or sales taxes, real estate and property taxes, gifts to charities, casualty and theft losses due to a federally declared disaster and medical expenses.

Find Out: Can I Claim My Boyfriend or Girlfriend As a Dependent?

Some of these deductions, however, have limits. For example, your charitable contributions can’t exceed 60% of your adjusted gross income. And your medical expenses are deductible only to the extent that they exceed 7.5% of your adjusted gross income.

It’s important to know what to itemize and the worst and best ways to itemize deductions. Being prepared before you tackle your taxes is the perfect way to ensure a smooth, accurate process.

1. Best: Itemize When Itemized Deductions Exceed the Standard Deduction

If you’re wondering, “Should I itemize?” the answer is yes but only if the total of your itemized deductions exceeds the value of your standard tax deduction. The standard deductions for each filing status are:

Single: $12,400
Head of Household: $18,650
Married Filing Jointly or Qualifying Widow(er): $24,800
Married Filing Separately: $12,400

If you’re married and filing separately, you and your spouse must file the same way. One spouse cannot claim the standard deduction if the other itemizes.

2. Worst: Some Itemized Deductions Are Disallowed With Alternative Minimum Tax

If you’re stuck paying the alternative minimum tax — a tax designed to prevent people from claiming so many deductions that they don’t pay taxes — you can’t claim many itemized deductions. For example, if you’re subject to the AMT, you’re not allowed to deduct taxes or mortgage interest on a home equity loan or line of credit that you didn’t use to buy, build or improve your home.

A Complete Guide: What Can I Write Off On My Taxes?

3. Best: Keep Records To Justify All Itemized Deductions

You shouldkeep records for all your deductionsin case the IRS audits your return. Some deductions come with tax forms that report the amount you can deduct. For example, you get your mortgage interest reported to you onForm 1098. For other deductions, like medical expenses and charitable donations, you’ll need to get receipts.

4. Worst: Inflating Your Deductions

When you’re filing your taxes, you might be tempted to inflate your deductions or claim deductions for which you don’t actually qualify. The IRS, however, is on the lookout for taxpayers who inflate their deductions — the practice even appears on its list of “Dirty Dozen” tax scams.

If you’re tempted to claim you made more charitable contributions or paid extra inmedical expenses, don’t. Penalties for falsely claiming deductions could potentially include having to pay 20% of the disallowed amount, 75% of the amount owed and a $5,000 penalty for filing a frivolous tax return. In addition, you might face criminal charges.

See: 10 Tax Loopholes That Could Save You Thousands

5. Worst: Incurring Additional Expenses To Justify Itemizing

When you claim a tax deduction, you don’t get a dollar back for every dollar of the deduction amount. Instead, your savings equal your marginal tax rate multiplied by your deduction amount.

For example, if you fall in the 24% tax bracket, you save 24 cents on your taxes for every dollar of any of the best itemized deductions you claim. That’s great if you have to spend the money anyway, but don’t incur an extra dollar of expenses just to save less than a quarter.

More From GOBankingRates

Gabrielle Olya contributed to the reporting for this article.