Itemized Deduction

Itemized deductions are specific, documented expenses you list on Schedule A instead of taking the flat standard deduction, and they only make sense to claim once their total exceeds your standard deduction amount. The major categories are state and local taxes (SALT), mortgage interest, charitable contributions, and unreimbursed medical expenses above a floor of 7.5% of AGI. Each category has its own rules and, in some cases, its own dollar cap, so itemizing requires more recordkeeping than simply taking the standard amount.

You total your itemized deductions on Schedule A and transfer the sum to Form 1040 in place of the standard deduction. The SALT deduction — state income or sales tax plus property tax combined — is capped at $40,000 ($20,000 for Married Filing Separately) under OBBBA for 2025 and later, up from a $10,000 cap ($5,000 MFS) that applied from 2018 through 2024; the higher cap phases out at 30 cents per dollar of MAGI above $500,000 ($250,000 MFS), tapering back toward the old $10,000 floor. Mortgage interest is deductible on loan balances up to $750,000 for loans originated after December 15, 2017.

A frequent misstep is itemizing out of habit even in a year where the standard deduction would produce a bigger deduction, or forgetting that some itemized categories, like medical expenses, only count the portion above a floor rather than the full amount spent. Taxpayers hovering near the standard deduction threshold sometimes use a strategy called bunching — concentrating two years of charitable giving into one calendar year — so they can itemize in the high year and take the standard deduction in the low year, maximizing total deductions across the two years combined.