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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.
As such, if you have a large number of itemized deductions you will likely be able to reduce your tax liability.
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:
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.
The IRS will not process 2012 returns for those who itemize deductions until January 30, 2013.