What Counts as Accumulated Deductions for the Year?

A tax deduction is an expense that can be subtracted from your adjusted gross income (AGI) to lower the amount of your income subject to federal tax. By reducing your taxable income, deductions decrease the amount of tax you are required to pay. Accumulating and claiming these deductions is a year-round activity that involves understanding which expenses qualify and how to properly document them.

The Two Paths for Deductions

Every taxpayer must decide whether to take the standard deduction or to itemize their deductions. The standard deduction is a fixed dollar amount, determined by filing status, that anyone can subtract from their income without needing to document specific expenses. For the 2025 tax year, the standard deduction is $15,000 for single filers, $30,000 for married couples filing jointly, and $22,500 for heads of household. These amounts are adjusted annually for inflation.

The alternative to the standard deduction is itemizing, which involves adding up all individual, eligible expenses you incurred during the tax year. The choice comes down to a simple calculation: a taxpayer should only itemize if their total accumulated deductions are greater than the standard deduction for their filing status. Taking the standard deduction provides a larger tax benefit if your itemized total is less.

Common Categories of Itemized Deductions

For those who itemize, understanding the common categories of deductible expenses is the next step. The total of these accumulated deductions is reported on Schedule A (Form 1040).

State and Local Taxes (SALT)

Taxpayers who itemize can deduct certain state and local taxes. This category includes state and local income taxes or, alternatively, state and local sales taxes; you must choose which one provides a larger deduction. This category also includes state and local real estate and personal property taxes. However, the total amount you can claim for all state and local taxes is capped at $10,000 per household per year ($5,000 if married filing separately). This limitation is set to expire after 2025 unless extended.

Home Mortgage Interest

Interest paid on a home mortgage is another deduction for many homeowners. Taxpayers can deduct the interest paid on mortgage debt used to buy, build, or substantially improve a primary residence and a second home. The deduction is limited to the interest on up to $750,000 of mortgage debt ($375,000 if married filing separately). For mortgages taken out before December 16, 2017, a higher limit of $1 million in debt applies. Your lender reports the total interest you paid for the year on Form 1098.

Charitable Contributions

Donations made to qualified charitable organizations can be deducted. This includes cash contributions and the fair market value of non-cash items like clothing or property. The deduction for cash contributions is limited to 60% of your adjusted gross income (AGI). For donations of appreciated property, such as stocks held for more than a year, the limit is 30% of AGI. You must obtain and keep acknowledgment letters from the charity for any single contribution of $250 or more.

Medical and Dental Expenses

You can deduct the amount of unreimbursed medical and dental expenses that exceeds 7.5% of your adjusted gross income. For example, if your AGI is $60,000, you can only deduct the portion of your medical expenses over $4,500. Qualifying expenses are broad and include payments for doctor visits, hospital stays, prescription medications, dental care, and premiums for health insurance if paid with after-tax dollars. Travel costs for obtaining medical care can also be included.

Record-Keeping for Your Deductions

Claiming itemized deductions requires diligent record-keeping throughout the year. You must maintain proof for every expense you deduct, as this documentation serves as evidence if your return is questioned by the IRS.

The types of documents to save include receipts, canceled checks, and bank or credit card statements that clearly show the expense. For specific deductions, additional proof is needed, such as mileage logs for medical-related travel or written acknowledgments from charities for donations. Organizing these records as you receive them using tax software, a spreadsheet, or physical folders is more effective than trying to reconstruct a year’s worth of spending at tax time.