When you file your taxes, you have the option to either claim the standard deduction or itemize your deductions. While the standard deduction is a set amount, itemized deductions will vary from person to person.
The most popular itemized deduction is mortgage interest. Taxpayers may deduct interest paid on up to $1,000,000 of mortgage debt. Other itemized deductions include:
Medical and Dental Expenses: Previously, you could deduct eligible expenses exceeding 7.5% of your AGI. Starting with 2013, this has changed to 10% of your AGI.
Deductible Taxes: You may deduct state, local, and foreign sales, property, income and vehicle taxes.
Mortgage Points: You may deduct points paid as part of obtaining a mortgage.
Charitable Contributions: You may deduct charitable contributions of cash and property, subject to certain limits and requirements as outlined in Publication 526. If your contribution exceeds certain amounts, you may need to file Form 8283.
While you do not have to submit proof of your itemized deductions, the IRS reserves the right to request documentation. Be sure to only claim deductions for which you have receipts or other proof of the transactions.
How to Itemize
Add up all of your itemized deductions.
Compare your itemized deductions to the standard deduction to see which is larger. You can claim the deduction which will allow you to pay the least amount of tax.
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