When taxpayers itemize their deductions, they are separately listing the tax deductions they wish to claim on their tax returns, the Tax Policy Center explains. The IRS allows taxpayers to choose the standard deduction or itemized deductions.Continue Reading
Generally, taxpayers choose to itemize deductions when the total of those deductions exceeds the standard amount, explains TurboTax. Homeowners with a mortgage may choose to itemize deductions because the mortgage points and property taxes could exceed the standard deduction.
Taxpayers can usually take a deduction for non-monetary or financial donations to a nonprofit corporation that is recognized by the IRS, TurboTax explains. The non-monetary donations must be valued at $250 or more, as of 2015, and taxpayers should maintain good records regarding those donations. Those with home-based businesses can deduct a portion of their utility bills when itemizing deductions.
The Tax Policy Center explains that the total number of itemized tax deductions is subtracted from the reported gross income, which then results in the taxable income. When the taxable income falls, so does the tax burden. Taxpayers can claim some deductions on top of the standard deduction or itemized deductions, and these typically include contributions to IRA accounts, interest on student loans and alimony payments.Learn more about Taxes