How Much in Deductions Do You Need to Itemize?

Every taxpayer must decide whether to take the standard deduction or to itemize deductions. A deduction is an amount that reduces your income subject to tax, which in turn lowers the amount of tax you owe. The core of the decision rests on whether the sum of your specific, eligible expenses is greater than a predetermined amount set by the government.

The Standard Deduction Threshold

The standard deduction is a fixed-dollar amount that you can subtract from your income to reduce your tax bill. The specific amount you can claim depends on your filing status, your age, and whether you are blind. For the 2024 tax year, the base standard deduction amounts are set and adjusted for inflation.

The amount for Single filers and those who are Married Filing Separately is $14,600. For the Head of Household filing status, the standard deduction is $21,900. Taxpayers who are Married Filing Jointly or are a Qualifying Surviving Spouse receive the largest deduction at $29,200.

An additional amount can be added to the base standard deduction for taxpayers who are age 65 or older, or who are legally blind. For 2024, an unmarried individual can increase their standard deduction by $1,950 for being either 65 or older or blind, or by $3,900 for being both. For married individuals, the additional amount is $1,550 for each applicable condition per spouse.

Common Itemized Deductions

Should your specific deductible expenses exceed the standard deduction for your filing status, it is generally beneficial to itemize. This process involves calculating several distinct categories of expenses, each with its own set of rules and limitations. The primary categories include medical and dental expenses, certain taxes you paid, home mortgage interest, and gifts to charity.

A deduction for medical and dental expenses is available, but you can only deduct the amount of qualifying medical expenses that exceeds 7.5% of your Adjusted Gross Income (AGI). Your AGI is a measure of income calculated from your gross income. Qualifying expenses can include payments for doctor visits, hospital care, prescription medications, and insurance premiums. You must subtract any reimbursements from insurance before calculating the deductible amount.

The deduction for state and local taxes, often referred to as SALT, is capped at $10,000 per household per year ($5,000 if you are married and file separately). This cap includes property taxes paid on your main home and a choice between either state and local income taxes or state and local sales taxes. You must choose the one that provides a greater benefit, which is typically income taxes for those in states with an income tax.

Taxpayers can deduct the interest paid on mortgage debt used to buy, build, or substantially improve a primary or second home. For mortgage debt taken on after December 15, 2017, the interest on up to $750,000 of debt is deductible ($375,000 for married filing separately). Your lender will send you Form 1098, Mortgage Interest Statement, which shows the amount of interest you paid for the year.

Contributions to qualified charitable organizations can also be itemized. For cash donations, you can generally deduct an amount up to 60% of your AGI. For donations of non-cash property, the limits are typically lower, often 30% or 50% of AGI, depending on the type of property and the organization. It is important to donate to organizations deemed qualified by the IRS and to maintain records, such as bank statements or written acknowledgments from the charity.

Comparing Your Totals

Once you have the sum of your deductions, compare it to the standard deduction amount that corresponds to your filing status for the tax year, including any additional amounts for age or blindness. If your total itemized deductions are greater than your standard deduction, you will likely reduce your tax liability by itemizing. If the standard deduction is the higher number, it is the more advantageous option. Choosing to itemize means you will report these deductions on Schedule A (Form 1040), Itemized Deductions, and file it with your tax return.