What are itemized deductions?

Itemized deductions refer to specific personal expenditures that taxpayers can deduct from their adjusted gross income (AGI) when calculating their taxable income. This process allows individuals to reduce their tax liability by acknowledging certain types of expenditures that contribute to their overall financial burden.

When taxpayers choose to itemize deductions on their tax returns, they can include various qualified expenses such as mortgage interest, state and local taxes, medical expenses exceeding a specified threshold, and charitable contributions. By itemizing, individuals have the potential to deduct a greater amount from their taxable income compared to the standard deduction, depending on their eligible expenses.

In contrast, some options mention required expenditures or suggest deductions that are inherently not allowable or are standard in nature, which do not fit the definition of itemized deductions. Understanding this concept is crucial as it provides a strategy for taxpayers to optimize their tax returns based on their unique financial situations.