Can Itemized Tax Deductions Save You Money?

By Katelyn Hayes   

when to itemize your tax deductions

You don't have to be an accountant to make smart tax deductions — you just need to know where to look. Itemizing tax deductions is key to lowering your gross income, bringing down your total taxable income and (hopefully) your tax bracket.

There are two tax deduction paths to choose from to reduce your personal tax burden. You can accept a standard tax deduction based on your tax-filing status, or create a list of itemized tax deductions.

The standard tax deduction amount varies depending on whether you're married, single, a widow(er), head of the household, and supporting any dependents. If you think you can save more by itemizing your tax deductions, you'll need to generate a list of items and determine how much of their costs you can subtract from your Adjusted Gross Income (AGI) — the actual number the government uses to determine the amount you ultimately pay.

Make sure you know the list of itemized tax deductions inside and out, so you don't lose a dime's worth of savings.

Itemized tax deductions you can't afford to miss

  1. Home mortgage interest
  2. State and local taxes — including personal property, and income or sales tax
  3. Charitable gifts — everything from cash gifts to clothing and furniture donations, and even volunteer associated expenses
  4. Medical expenses:1
    • Doctor fees, including dentists, chiropractors and psychologists
    • Lab costs
    • Eyeglasses, contact lenses and laser surgery
    • Hearing aids and false teeth
    • Nursing home expenses
    • Equipment for disabled people
    • Medical transportation
  5. Unreimbursed casualty losses from theft, fire and other acts of nature.2

Miscellaneous itemized deductions

Please note that the itemized tax deductions listed here are subjected to the 2-percent-limit rule: you can only apply the deduction if the total of all the tax deductions you can claim in this category exceeds 2 percent of your AGI:3

  1. IRA losses
  2. Home office-related expenses
  3. Safe-deposit box fees — only when used exclusively for work-related documents
  4. Tax preparation costs
  5. Unreimbursed employee expenses:4
    • Union dues or similar professional fees
    • Employer-required medical exams
    • Job-hunting costs within the same career
    • Work uniforms and required safety gear
    • Legal fees
    • Passport acquired for a business trip

You can also deduct gambling losses, which are not subject to the 2-percent rule.

Please refer to the IRS website for a complete list of itemized tax deductions.

Footnotes

1 "Medical and Dental Expenses," IRS.gov

2 "Tax Tips from H&R Block," HRBlock.com

3 "Tax Deduction Wisdom - Should You Itemize?" TurboTax.com

4. "Miscellaneous Deductions," Internal Revenue Service, Dec. 30, 2008