Both the standard deduction and the total of your itemized deductions reduce the amount of income on which you must pay federal income tax. You can claim the standard deduction, or you can itemize individual deductions that you qualify to claim—line by line by line—but you can’t do both. It only makes sense to choose the one that reduces your taxable income more. The standard deduction is the simpler solution: a set amount based on your filing status, (e.g., single or married). The Tax Cuts and Jobs Act (TCJA) more or less doubled standard deductions when it went into effect in January 2018. As of the 2022 tax year (the return filed in 2023), the standard deduction is $12,950 for single taxpayers and for those who are married but filing separate returns. This goes up to $25,900 if you’re married and filing jointly with your spouse or if you’re a qualifying widow or widower with a dependent child. It’s $19,400 if you qualify for the head-of-household filing status. Most taxpayers claimed the standard deduction even before the TCJA, which also made some adjustments to some itemized deductions, capping them at certain amounts where they had been unlimited before. Other itemized deductions were eliminated entirely.

Types of Itemized Deductions

Itemizing involves reporting your expenses for specific types of allowable deductions, adding them all together, then entering that total on your tax return. The itemized total is subtracted from your AGI to reduce the amount of taxable income. If you plan to itemize, you should keep track of your qualified expenses during the year. Keep your receipts and other documents to show that these expenses are legitimate in case the IRS asks for proof. Documentation can include bank statements, check stubs, property tax statements, insurance bills, medical bills, and acknowledgment letters for charitable donations.  Generally, you can claim itemized deductions in the following categories:

Medical and dental expenses State and local income taxes  Real estate and personal property taxes  Home mortgage interest of $750,000 or less Gifts to charity Casualty or theft losses

Medical and Dental

Medical and dental expenses include the cost of insurance premiums as long as your health plan doesn’t reimburse you for them. Other medical and dental care costs can be deducted if they are qualified expenses. You can deduct the portion that exceeds 7.5% of your AGI. For instance, if your AGI were $55,000, and you had $7,000 in qualifying medical expenses, your deduction would be limited to $3,375—the amount that exceeds $4,125 (7.5% of your AGI).

State, Local, and Real Estate Taxes

Deductions for state, local, and property taxes are limited to $10,000, or $5,000 if you’re married and filing a separate return. This is $10,000 collectively, not $10,000 for each type of tax.

Mortgage Interest Deduction

The mortgage interest deduction is capped at debts of $750,000. If you’re married and file separately, the cap is $375,000. The limitations increase to $1 million and $500,000 if you incurred the debt on which you pay interest before December 16, 2017. The deduction is limited to acquisition debt only, not equity debt as has historically been the case, unless the funds from the equity loan are used to “buy, build, or substantially improve” a home, according to the IRS.

Charitable Gifts

Most taxpayers can deduct charitable contributions of up to 60% of their AGI, although some types of gifts are still subject to 20%, 30%, and 50% limits.

Casualty and Theft Losses

Casualty and theft loss deductions are limited to losses sustained due to events that occurred in locations that have been declared to be disaster areas by the president, unless you file a reimbursement claim and reduce the loss by the amount you were reimbursed.

Do I Need to Itemize Deductions?

It’s to your advantage to itemize when the total of all your individual deductions exceeds the standard deduction for your filing status. Otherwise, it would make no sense—you’d be paying taxes on more income than you should be. For example, you would be better off itemizing if you had total itemized deductions of $13,500 in 2022. This would take an additional $500 off your taxable income, because the standard deduction is $12,950. But if you were to qualify for a head-of-household deduction and choose to itemize instead, you’d end up paying taxes on an additional $5,900—the difference between $13,500 in itemized deductions and the $19,400 standard head-of-household deduction. Sometimes the decision to itemize or to claim the standard deduction can be out of your hands. Married couples who file separate tax returns must each use the same method. You must both take the standard deduction, or you must both itemize.