Choosing between the standard deduction and itemizing can significantly impact your tax bill. The IRS provides an Itemized Deductions Worksheet (found in the Form 1040 Instructions) to help you determine which option saves you more money. This step-by-step guide explains how to use the worksheet to make a smart deduction choice for the 2025 tax year.
📋 Step 1: Gather Your Documentation
Before you begin, collect your year-end records for the following:
- Mortgage interest (Form 1098)
- Property tax bills
- Charitable donation receipts
- Medical expense receipts
- State and local income or sales tax records
- Casualty or disaster loss documentation (if applicable)
📝 Step 2: Fill Out the Worksheet (Line-by-Line)
This worksheet is often found just before Schedule A in the IRS 1040 instructions. Let’s walk through each line with a description and example amounts.
Line 1: Medical and Dental Expenses
Enter total qualified medical and dental expenses. Then subtract 7.5% of your AGI.
Example: $8,000 medical expenses – $6,000 (7.5% of AGI) = $2,000
Line 2: State and Local Taxes (SALT)
Enter the total of your state and local income or sales taxes, plus real estate and personal property taxes. The SALT deduction is limited to $10,000 (or $40,000 if under new AGI thresholds).
Example: $6,000 (state income) + $5,000 (property taxes) = $11,000 → limited to $10,000
Line 3: Home Mortgage Interest
Enter the deductible interest from Form 1098. Loans must be acquisition debt used to buy, build, or improve the home.
Example: $7,200 mortgage interest
Line 4: Gifts to Charity
Include all qualified charitable contributions made to eligible organizations. For cash donations, you may deduct up to 60% of AGI.
Example: $3,000 donations
Line 5: Casualty and Theft Losses
Only losses in federally declared disaster areas qualify. Must use Form 4684.
Example: $2,500 deductible disaster loss
Line 6: Other Itemized Deductions
Includes items like gambling losses (up to winnings) or impairment-related expenses.
Example: $1,000 gambling losses
Line 7: Total Itemized Deductions
Add all lines together to get your total itemized deductions.
Example Total: $2,000 + $10,000 + $7,200 + $3,000 + $2,500 + $1,000 = $25,700
📊 Step 3: Compare with Your Standard Deduction
- Single: $15,750
- Married Filing Jointly: $31,500
- Head of Household: $23,625
- Additional for age 65+ or blind: $1,600–$6,000 per person
Example: If your itemized total is $25,700 and you’re single with a $15,750 standard deduction, itemizing gives you a better tax benefit.
📌 Step 4: Decide Which to Use
- If your itemized deductions are greater than your standard deduction, itemize on Schedule A (Form 1040).
- If your standard deduction is greater, take the standard deduction—you don’t need to complete Schedule A.
✅ Example Comparison Summary
| Deductions Type | Amount | Use? |
|---|---|---|
| Standard Deduction (Single) | $15,750 | Only if itemized deductions are lower |
| Itemized Deductions (from Worksheet) | $25,700 | ✅ Better Choice |
💡 Tips for Making the Smart Deduction Choice
- Run both options every year—especially if you’ve had big medical bills, moved, or made large donations.
- Use tax software or IRS worksheets for accurate calculations.
- Keep documentation for all deductions in case of IRS review.
- SALT cap changes in 2025 (up to $40,000 for some filers) make itemizing more attractive again.
🧾 Resources
Need help running your actual numbers for 2025? Share your estimated deduction categories and filing status, and I’ll help you compare itemizing vs. standard deduction.
