Itemized Deduction
Tax Glossary Term
Definition
Itemized deductions are specific expenses the tax code allows you to subtract from your AGI instead of taking the standard deduction. You report them on Schedule A of Form 1040. The major categories include state and local taxes (SALT, capped at $40,400 for 2026 under the OBBBA), mortgage interest on up to $750,000 of acquisition debt, charitable contributions, and medical expenses that exceed 7.5% of AGI. You should itemize only when the total of your qualifying expenses exceeds the standard deduction for your filing status. Since the standard deduction nearly doubled in 2018, fewer taxpayers itemize (roughly 10% now versus about 30% before the change). However, taxpayers in high-tax states or with large mortgages often still benefit from itemizing, especially with the raised SALT cap. A common strategy is 'bunching,' which means concentrating two years of charitable donations into one year to push above the standard deduction threshold, then taking the standard deduction the following year. Remember that above-the-line deductions (like the Schedule 1-A tips and overtime deductions) reduce AGI before you choose between standard and itemized, so they work alongside either option.
Example
SALT (state income + property taxes): $28,000
Mortgage interest: $12,000
Charitable contributions: $5,000
Itemized total: $45,000 (exceeds $16,100 standard deduction, so itemize)