What are itemized deductions?

Itemized deductions refer to specific expenses that the IRS permits taxpayers to deduct from their gross income, resulting in a reduction of their taxable income. These deductions can include various categories such as medical expenses, mortgage interest, state and local taxes, and charitable donations, among others.

Taxpayers can choose to either take the standard deduction or itemize their deductions when filing taxes, and itemizing may be beneficial if those specific expenses exceed the standard deduction amount. The nature of these deductions is defined by IRS rules, which outline the types of expenses eligible for deduction, reflecting their role in providing tax relief to taxpayers based on their actual incurred expenses rather than a flat-rate deduction applicable to all.

In summary, the defining feature of itemized deductions is that they represent actual expenses incurred that can be directly claimed to reduce taxable income, unlike general deductions that may not apply equally to all taxpayers or arbitrary expenses that a taxpayer selects.