Itemizing your Taxes Made Easier
This itemizing taxes overview has been updated with information for the 2023 & 2024 tax years. If you’re like me, you’re probably still waiting around for all your income statements to trickle in from banks, discount brokers, your employer, and anyone else whom you might have some sort of financial interest with. The part that is more in your control is the organization of your deductions. If you’re not sure whether or not itemizing your taxes is right for you, you may want to take a look at IRS Form 1040. What follows will be a teaser on what you could potentially itemize and how to organize your tax deductible expenses throughout the year.
Passing on the Standard Tax Deduction
Pre tax-reform, I was one of the 35-40% of Americans who itemized my taxes and did not take the standard deduction, and it paid off. I used to get excited about being able to itemize my taxes as I could see my tax obligation shrink with each added deduction or credit.
With the Tax Cut & Jobs Act (tax reform that went into effect starting in 2018), the standard deduction levels were doubled, and it’s now estimated than only about 10% of tax filers itemize their deductions now. The standard deduction levels are annually adjusted and indexed to inflation. The current standard deduction levels are:
2023 Standard Deductions:
- $13,850 for single filers
- $13,850 for married, filing separately
- $27,700 for married filing jointly
- $20,800 for head of household
2024 Standard Deductions:
- $14,600 for single filers
- $14,600 for married, filing separately
- $29,200 for married filing jointly
- $21,900 for head of household
This is quite a dramatic change over what the 2017 (pre-tax reform) standard deductions were:
- $6,350 for single filers
- $6,350 for married, filing separately
- $12,700 for married filing jointly
- $9,350 for head of household
- $1,050 for dependents
- $4,050 personal exemption
A List of Tax Deductions by Category
Itemizing your taxes can be fairly straightforward – but much more so if you prepare year round. I have a simple way of dealing with tax documents in lieu of itemizing that has worked for me over the years. I’d recommend grabbing some manila folders and labeling them. Here’s how I group tax related paperwork for deductions:
1. Investment Loss Deductions
This includes capital loss deductions for losses from mutual funds, stocks, and other investments. If you get electronic statements from your online brokers, you may actually need to go into your account online and print off your 1099-B tax forms.
2. Charitable Donation Deductions
If you have record of a gift that you gave to a 501(c)(3), hold onto them. Also, you may be able to deduct mileage and other expenses from volunteering your time and efforts for a non-profit. Here’s complete documentation on IRS deductible charitable donations and my guide on donation receipts (I used to work at a non-profit). Note that there is a IRS maximum charitable donation limit, which is based off your income level and what type of organization you contribute to.
Update: in 2021 there was a universal new charitable donation deduction for those that claimed the standard deduction. The 2021 charitable donation tax deduction for non-itemizers was $600 for “married filing jointly” and $300 for other filers. The universal donation deduction expired and is no longer active for 2023 or 2024.
3. Real Estate Expense Deductions
The State and Local Tax (SALT) deduction is the biggest itemized deduction for most people, often due to property tax amounts, but it was limited to $10,000 per year by tax reform. If you own a home, you’ll need a copy of your tax bill or a statement from your escrow company on how much in property taxes you paid over the year. Those with mortgages will need a 1098 form from their mortgage provider. Those lucky enough to claim the first-time homebuyer credit will need to attach IRS Form 5405. Also, don’t forget energy tax credits for things like wind and solar installations.
4. Education Expense Deductions
Education tax deductions and credits include tuition paid (IRS Form 1098-T), interest paid on student loans (IRS Form 1098-E), college expenses (books, travel, etc.).
5. Family Expense Deductions
Have a family? You probably need some deductions these days. Deductible expenses include child and dependent care expenses, adoption expenses, child tax credits, and earned income tax credits.
6. Personal Property & Vehicle Deductions
In this category you can lump in any vehicle registration fees, personal property taxes paid, and tax credits for electric vehicles (including potential state electric vehicle tax credits).
7. Medical & Dental Expense Deductions
You can deduct medical and dental expense that exceed 7.5% of your gross AGI. These expenses can include medical bills, prescriptions costs, medical equipment costs, insurance premiums, and miles driven for medical purpose. Payments to HSAs are also tax deductible if you itemize, regardless if you hit the 7.5% on other medical expenses.
8. Retirement & Investment Expense Deductions
Getting money back for investing is great! HSA, Traditional IRA, SIMPLE IRA, Solo 401K, & SEP IRA contributions are tax deductible. Your 401K, 457B, and 403B contributions should already be factored in through payroll and your W2. Also, if you’re under certain income thresholds, you may be able to claim the Retirement Savings Contribution Credit, aka the “Saver’s Credit“.
9. Employment Expense Deductions
You can no longer claim a deduction for unreimbursed employee expenses unless you fall into one of the following categories of employment, or have certain qualified educator expenses.
- Armed Forces reservists.
- Qualified performing artists.
- Fee-basis state or local government officials.
- Employees with impairment-related work expenses.
Unreimbursed employee expenses for individuals in these categories of employment are deducted as adjustments to gross income. Qualified employees listed in one of the categories above must complete Form 2106 to take the deduction. Certain qualified educator expenses are also deducted as an adjustment to gross income but you are not required to complete Form 2106.
You can deduct only unreimbursed employee expenses that are:
- Paid or incurred during your tax year,
- For carrying on your trade or business of being an employee, and
- Ordinary and necessary.
10. Miscellaneous Deductions
If you have miscellaneous deductions that exceed 2% of your AGI, you can deduct them. This includes a wide variety of expenses that you might not think are deductible.
Update: the miscellaneous deduction was eliminated with the Tax Cuts & Jobs Act.
Itemizing Taxes Summary
Itemizing your tax deductions isn’t the easiest or most enjoyable thing in the world to do, but it can potentially pay huge dividends for you. If you’re looking for more tips, check out my guide on how to do your taxes.
If you pay your credit card balance in full (mandatory here), you can profit by paying your taxes with a credit card and even deduct the expense of the processing fee.
To help you figure this all out, check out my list of the best tax software or cheapest ways to e-file for more info, including feature comparisons. I’ve always used DIY tax software and it has helped me understand all the ins and outs of what deductions I can claim, what losses I can write off, etc.
Reader Tax Deduction Discussion:
- Are you itemizing your taxes this year?
- Would you add any major buckets of deductions to this list?
- How long have you been itemizing?
- Do you get excited about itemizing your taxes?
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