Should I itemize deductions on my tax return?

Tax season has a way of sneaking up on us every year, bringing with it one big question for many taxpayers—should I itemize deductions or stick to the standard deduction? Knowing if itemizing is the right move for you can mean uncovering hidden opportunities to save on your tax bill.

But the decision isn't always straightforward. Factors like your total deductions, lifestyle, and even recent changes in tax law can all affect whether it’s worth your while to itemize on your tax return. This guide will break down what itemized deductions are, how they work, and how to decide if they’re a better fit than the standard deduction.

What Does It Mean to "Itemize Deductions"?

When filing your tax return, you can reduce your taxable income through deductions. The IRS offers two main options:

1. The Standard Deduction – A fixed amount based on your tax filing status (e.g., single, married filing jointly).
2. Itemized Deductions – Specific expenses you incurred during the tax year that can be subtracted from your income.

If you choose to itemize, you’ll list qualifying expenses such as medical costs, mortgage interest, or charitable donations directly on Schedule A of your tax return. The idea is simple—if your itemized deductions exceed the standard deduction amount, itemizing can lower your taxable income and save you money.

Why Itemizing Isn’t Always the Go-To

While itemizing might sound appealing, not everyone should do it. Many taxpayers choose the standard deduction because:

• It’s simple and requires no extra calculation.
• Tax law changes under the Tax Cuts and Jobs Act (TCJA) nearly doubled the standard deduction starting in 2018, making it harder for many taxpayers to surpass this threshold with their itemized deductions.

For tax year 2023, the standard deduction amounts are:

• $13,850 for single filers
• $27,700 for married couples filing jointly
• $20,800 for heads of household

We'll explore how you can determine which deduction method is right for you next.

What Can You Include When Itemizing Deductions?

To decide whether to itemize, you need to know which expenses qualify as deductions. Here's a closer look at some of the most common types of itemized deductions:

1. Medical and Dental Expenses

Out-of-pocket medical costs can be itemized, but only the portion that exceeds 7.5% of your adjusted gross income (AGI). Qualified expenses include prescriptions, doctor visits, and even health insurance premiums if they’re not paid through payroll.

Example: If your AGI is $50,000, only medical expenses over $3,750 qualify.

2. State and Local Taxes (SALT)

The deduction for state and local taxes (including property tax and income/sales tax) is capped at $10,000 ($5,000 if married filing separately). This is particularly relevant for taxpayers in states with high income or property taxes.

3. Home Mortgage Interest

Homeowners can deduct mortgage interest on loans up to $750,000 for a primary or second home. This deduction applies to new loans taken out after 2017.

4. Charitable Contributions

Contributions to qualified charitable organizations can be deducted, up to 60% of your AGI. Be sure to document your donations, whether they’re in cash or goods like clothing or household items.

5. Casualty and Theft Losses

If you’ve experienced damage due to a federally declared disaster, or suffered unreimbursed theft losses, certain portions may be deductible.

6. Miscellaneous Deductions

While the TCJA eliminated many miscellaneous itemized deductions, a few are still permitted, such as gambling losses (up to the amount of winnings) and unreimbursed expenses for certain job-related activities.

Standard Deduction vs. Itemizing: How to Decide

How do you know if itemizing will benefit you? It all comes down to the numbers. Here's how to decide:

Step 1: Estimate Your Deductible Expenses

Add up your total qualifying expenses in each deduction category. If the sum exceeds your standard deduction amount, itemizing might be worth it.

Step 2: Consider Your Filing Status and Life Changes

Changes like buying a home, incurring high medical bills, or contributing heavily to charity often make itemizing more advantageous. On the other hand, if your finances are relatively straightforward, the standard deduction may suffice.

Step 3: Don’t Forget Tax Law Changes

Be aware of limits like the SALT cap, which kept total tax reductions for many high-income households lower than in the past.

Pro Tip: Use tax software or consult with a tax professional. They can help you calculate your deductions and decide whether itemizing is worth pursuing.

When Should You Absolutely Consider Itemizing?

While itemizing isn’t always necessary, certain situations make itemizing highly worthwhile:

• Homeowners: If you pay significant mortgage interest or property taxes, itemizing could save you thousands.
• High-Charitable Donors: Generous charitable giving often tips the scales in favor of itemizing.
• Medical Expenses: Your out-of-pocket costs due to major health events or surgeries could qualify if they exceed the 7.5% AGI threshold.

Common Missteps to Avoid When Itemizing

Filing taxes can get complicated, but avoiding these pitfalls will make the process smoother:

• Failing to Keep Records – Itemized deductions often require receipts, statements, or invoices. Keep organized records to back up your claims in case of an audit.
• Overlooking Limits – SALT caps or other ceilings can limit the benefit of these deductions.
• Guessing Without Guidance – The math can get tricky. Use tools like calculators or professional CPAs to confirm your decision.

Want Tailored Guidance? We Can Help

At SD Mayer & Associates, we don’t just crunch numbers—we strategize with you to minimize your tax burden and maximize your savings. Whether you’re unsure about itemizing, need help calculating deductions, or just want to simplify tax season, we’ve got you covered.

Get in touch today and discover smarter ways to do taxes. Better savings are just a call (or click) away.