Itemized deductions Meaning
Itemized deductions are specific expenses that eligible taxpayers can report on their federal income tax returns to reduce their taxable income. These deductions are listed individually on the tax return, and taxpayers can choose to itemize these deductions instead of taking the standard deduction if it results in a greater reduction of their overall tax liability.
Some common categories of itemized deductions include:
- Medical and Dental Expenses
- Charitable Contributions
- State and Local Taxes
- Interest Payments
- Casualty and Theft Losses
- Job-Related Expenses
It's important to note that itemizing deductions requires more detailed record-keeping and documentation compared to taking the standard deduction. Taxpayers should carefully evaluate whether their total itemized deductions exceed the standard deduction amount for their filing status. If itemizing provides a greater tax benefit, it can lead to a lower taxable income and, consequently, a reduced tax liability.