Itemized Deduction

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Tax Loss Carryforward

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

    Deductible losses stemming from the loss or destruction of the ...
  3. Married Filing Jointly

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

    A United States government agency that is responsible for the ...
  5. After-Tax Contribution

    A contribution made to any designated retirement or any other ...
  6. Schedule A

    A U.S. income tax form used by taxpayers to report itemized deductions, ...
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. What's the difference between regressive and progressive taxes?

    The U.S. federal tax system and local and state tax systems are complex in that they combine progressive, regressive and ... Read Full Answer >>
  4. What are the differences between regressive, proportional and progressive taxes?

    Tax systems fall into three main categories within the tax code: regressive, proportional and progressive taxes. Regressive ... Read Full Answer >>
  5. What are some examples of a value added tax?

    A value-added tax (VAT) is a consumption tax levied on products at every point of sale where value has been added, starting ... Read Full Answer >>
  6. What are common reasons for governments to implement tariffs?

    A tariff is a tax imposed by a governing authority on goods or services entering or leaving the country and is typically ... Read Full Answer >>
Related Articles
  1. 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.
  2. Retirement

    Tax Tips For The Individual Investor

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

    Cut Your Tax Bill With Donor-Advised Funds

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

    Deducting Your Donations

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

    Surviving The IRS Audit

    Keeping thorough records and knowing the penalties make this experience easier than you'd expect.
  6. 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.
  7. Taxes

    An Overview Of Itemized Deductions

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

    Tax Deductions On Mortgage Interest

    If you're a homeowner, this is one item you want to understand and use on your return.
  9. 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.
  10. Taxes

    Increase Your Tax Refund With Above-The-Line Deductions

    Find out about these deductions and how you can use them to lower your tax bill.

You May Also Like

Hot Definitions
  1. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  2. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  3. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  4. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  5. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center