Itemized Deduction
An itemized deduction is a specific qualifying expense that a taxpayer may subtract from adjusted gross income (AGI) on Schedule A of Form 1040 instead of claiming the standard deduction, with the total reducing taxable income dollar for dollar. Common itemized deductions include mortgage interest, state and local taxes (subject to the SALT cap), charitable contributions, and unreimbursed medical expenses exceeding 7.5% of AGI.
Itemizing deductions requires a taxpayer to identify, document, and report qualifying expenses individually on Schedule A attached to Form 1040. Itemizing is beneficial only when the total of allowable deductions exceeds the applicable standard deduction — for 2025, that is $15,000 for single filers or $30,000 for married filing jointly.
The most significant itemized deductions for most U.S. taxpayers include: home mortgage interest on loans up to $750,000 of acquisition debt; state and local taxes (SALT) capped at $10,000 per return under the TCJA; charitable contributions to qualifying 501(c)(3) organizations (generally up to 60% of AGI for cash gifts); and unreimbursed medical and dental expenses exceeding 7.5% of AGI.
Investment-related expenses were largely eliminated as itemized deductions by the TCJA. Prior to 2018, taxpayers could deduct investment advisory fees, tax preparation fees, and other miscellaneous itemized deductions subject to a 2% of AGI floor. These deductions are suspended through 2025 under the TCJA. The TCJA provisions are scheduled to sunset after December 31, 2025, which may restore some of these deductions unless Congress acts to extend the law.
Casualty and theft losses are deductible as itemized deductions only if the loss arises from a federally declared disaster. This limitation, also introduced by the TCJA, significantly narrowed the previous rule that allowed deductions for personal casualty losses exceeding a floor.
For investors, one of the most relevant itemized deductions is the charitable contribution deduction. Donating appreciated securities (stocks, bonds, or mutual funds held longer than one year) to a qualified charity allows the donor to claim a deduction for the full fair market value of the securities while avoiding recognition of the embedded capital gain — a strategy often more tax-efficient than selling the securities and donating cash.
Gambling losses are also deductible as an itemized deduction, but only to the extent of gambling winnings reported as income. This is one example of a deduction that cannot exceed the associated income item. Taxpayers who itemize must keep thorough records and supporting documentation, as the IRS may request substantiation for deductions claimed on Schedule A.