You get to subtract one of two things from your income, whichever is bigger. Knowing which applies to you is the difference between a fair bill and an overpayment.
You pick the larger of two numbers
Everyone can take the standard deduction, a flat amount based on your filing status, no receipts required. Or you can itemize, adding up specific expenses. You take whichever total is higher.
Since the standard deduction rose several years ago, most people come out ahead taking it. But "most" is not "all," and assuming without checking is how people leave money behind.
When itemizing wins
Itemizing tends to win when you have a mortgage (the interest is deductible), pay significant state and local taxes, had large out-of-pocket medical bills, or gave meaningfully to charity.
Homeowners in higher-cost or higher-tax areas are the most likely to benefit. Renters with modest expenses almost always do better with the standard deduction.
How to decide
Add up your itemizable expenses for the year and compare the total to the standard deduction for your status. If itemizing is higher, itemize; if not, take the standard and move on.
If you are close to the line, "bunching" can help: concentrate charitable gifts or elective medical costs into a single year so you clear the itemizing threshold that year and take the standard the next.
- →You take whichever deduction is larger, not both.
- →Mortgages, high state taxes, and big giving favor itemizing.
- →If you are near the line, bunch expenses into one year.