Definition of Itemized Deductions



An itemized deduction is an item of expense that is allowed to be subtracted from the adjusted gross income. The expenses that are categorized as itemized deductions can be medical expenses, property taxes, state taxes, home mortgage interest, charitable contributions, investment interest expense, and local income taxes. The main objective of using itemized deductions is to reduce your adjusted gross income and ultimately reducing your tax liability.

 


Assume Mr. Alex is an individual and has a total adjusted gross income of $38000. The itemized deductions total up to $13000. The taxable income will be $25000 ($38,000 - $25,000).


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