Itemized deductions also reduce your Adjusted Gross Income (AGI), but work differently than the standard deduction. As the name implies, the standard deduction is a standard (or fixed) amount. In contrast, the itemized deduction is a deduction for eligible expenses that you can itemize. And the amount differs from taxpayer to taxpayer. The itemized deduction amount is determined by adding all applicable deductions and subtracting the sum from your adjusted gross income. Common and allowable itemized deduction items include:
- Casualty and theft losses from a federally declared disaster
- Below-the-line Charitable donations
- Deduction for state and local taxes
- Gambling loss deduction (only to the extent of gambling winnings reported on your tax return)
- Home mortgage interest
- Investment Interest paid on money borrowed for property held for investment
- Unreimbursed dental and medical expenses (AGI threshold is 7.5%), including health insurance premiums paid with after-tax income
Other slightly less common but are equally tax-beneficial itemized deductions to consider this tax season include:
- Federal estate tax on income in respect of a decedent
- Amortizable bond premium on bonds acquired before Oct. 23, 1986
- Deduction for repayment of amounts under a claim of right if over $3,000
- Certain unrecovered investments in a pension
- Impairment-related work expenses of a disabled person