Average Itemized Deductions in Some States Reach Over $50k. Are You Getting the Most Out of Your Tax Return?

Eric Reed

Mon, Mar 10, 2025, 6:52 AM 9 min read

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Should you itemize your taxes?

Most taxpayers instrumentality the modular each year. The Tax Policy Center estimates that lone astir 10% of households itemize their taxes. This is successful ample portion due to the fact that the modular deduction is $15,000 per idiosyncratic for idiosyncratic filers ($30,000 combined for joined households). That makes it ample capable that, successful astir cases, lone the wealthiest households person capable qualified spending to transcend the modular deduction successful the archetypal place.

However, for households that bash instrumentality line-item deductions, the taxation benefits tin beryllium significant. In fact, a caller survey published by SmartAsset finds that successful immoderate states households trim their taxable income by $50,000 to upwards of $100,000 done itemized deductions.

With taxation play coming up, is this thing that should beryllium connected your radar? Here's what you should know. You tin besides talk to a fiscal advisor if you’re funny successful speaking astir your taxes with a professional.

Income taxation deductions are a communal mode of lowering your wide taxation bill. With a taxation deduction, you trim your "taxable income." This is the magnitude of income connected which you wage taxes. By reducing taxable income, you tin trim some your taxation brackets and your wide taxation bill.

For example, accidental that you wage an effectual 20% taxation rate. If your income is $1,000, you would wage $200 successful taxes and support $800 successful after-tax income. But, accidental you person a $250 deduction. This would springiness you $250 successful non-taxable income (your deduction) and $750 successful taxable income (the remainder). At a 20% taxation rate, you would wage $150 successful taxes and support $800 successful after-tax income.

Deductions should not beryllium confused with taxation credits. Where a deduction reduces the income connected which your measure is based, a taxation recognition is an accommodation to your taxation measure itself. In our example, accidental that you person a $100 taxation credit. In that case, you would person $1,000 of taxable income. You would wage 20% successful taxes connected that, generating a taxation measure of $200. You would past trim that measure by the $100 taxation credit, giving you $100 successful taxes and $900 of after-tax income.

Some taxation credits are "refundable." This means that if the recognition reduces your taxation measure beneath $0, the authorities volition nonstop you a cheque to screen the difference. Other credits are "nonrefundable," meaning that they cannot trim your taxation measure beneath $0.

Tax deductions are not refundable, meaning they cannot trim your taxes beneath $0. However, astir households wage taxes implicit the people of the twelvemonth either done automatic withholding (for W-2 employees) oregon estimated taxes (for self-employed persons oregon tiny concern owners). If a taxation deduction lowers your taxation measure beneath what you person already paid, the IRS volition nonstop you a refund for those overpayments. This does not marque your deductions refundable. The IRS is conscionable repaying wealth that you paid but did not owe.