Itemized Deduction


DEFINITION of 'Itemized Deduction'

A deduction from a taxpayer's taxable adjusted gross income that is made up of deductions for money spent on certain goods and services throughout the year. The specific deductions that are allowed are outlined by the Internal Revenue Service and include such expenses as mortgage interest, state and local taxes, gifts, and medical expenses.

BREAKING DOWN 'Itemized Deduction'

Usually, an itemized deduction is limited to a certain percentage of adjusted gross income. As an alternative to standard deduction, an itemized deduction requires taxpayers to keep track of each possible tax-reducing expense throughout the year.

Individuals who frequently spend large amounts on medical care, state and local taxes, donations or other deductible expenses may be better off itemizing. However, tax law may set thresholds in spending that must be exceeded before the deductions can be made. For example, in the medical category, perhaps only expenses that exceed 7.5% of your adjusted gross income may be deducted. If you didn't spend at least that much, then none of your medical expenses will be deductible.

  1. Adjusted Gross Income - AGI

    A measure of income calculated from your gross income and used ...
  2. Tax Loss Carryforward

    A tax loss carryforward takes place where a business or individual ...
  3. Casualty And Theft Losses

    Deductible losses stemming from the loss or destruction of the ...
  4. Income Tax

    A tax that governments impose on financial income generated by ...
  5. Married Filing Jointly

    A filing status for married couples that have wed before the ...
  6. Internal Revenue Service - IRS

    A United States government agency that is responsible for the ...
Related Articles
  1. Taxes

    10 Money-Saving Year-End Tax Tips

    Getting organized well before the deadline will curb your frustration and your tax liability.
  2. Taxes

    Tax-Saving Advice For IRA Holders

    Be informed about benefits and deductions that may apply to you and avoid costly mistakes on your return.
  3. Retirement

    Tax Tips For The Individual Investor

    We give you seven guidelines to help you keep more of your money in your pocket.
  4. Taxes

    Cut Your Tax Bill With Donor-Advised Funds

    Beat the tax man come April 15 by investing in a charity-friendly fund.
  5. Taxes

    Deducting Your Donations

    Generosity may be its own reward, but some charitable giving also provides personal tax benefits.
  6. Taxes

    Surviving The IRS Audit

    Keeping thorough records and knowing the penalties make this experience easier than you'd expect.
  7. Taxes

    Get A Tax Credit For Your Foreign Investments

    The foreign tax credit provides a break on investment income made and taxed in a foreign country.
  8. Taxes

    An Overview Of Itemized Deductions

    Not taking the standard deduction this year could save you hundreds of dollars.
  9. Taxes

    Tax Deductions On Mortgage Interest

    If you're a homeowner, this is one item you want to understand and use on your return.
  10. Taxes

    Don't Put Off Your Year-End Tax Plan

    From sales tax deductions to credit reports, check out what items should be on your financial checklist.
  1. How long do I need to keep income tax records?

    Keep all tax-related records for at least three years. For example, keep your 2015 tax return, filed in early 2016, at the ... Read Full Answer >>
  2. What is the difference between a state income tax and a federal income tax?

    The United States has a multi-tiered income tax system under which taxes are imposed by federal, state and most local governments. ... Read Full Answer >>
  3. How can I make sure I get all my eligible deductions?

    Most tax preparation software does a good job. However, like any recipe, the end results are only as good as what goes into ... Read Full Answer >>
  4. Which is better for tax deductions, itemization or a standard deduction?

    Each deduction that you claim may result in a decrease in the amount of taxes that you owe. However, whether you receive ... Read Full Answer >>
  5. Are personal loans tax deductible?

    Interest paid on personal loans is not tax deductible. If you take out a loan to buy a car for personal use or to cover other ... Read Full Answer >>
  6. Does a Flexible Spending Account (FSA) cover braces?

    Funds from a Flexible Spending Account (FSA) can be used to cover costs associated with installing, maintaining and removing ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  2. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  3. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  4. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
  5. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the legal sense may also refer to an exemption from liability ...
  6. Discount Bond

    A bond that is issued for less than its par (or face) value, or a bond currently trading for less than its par value in the ...
Trading Center