Business, Legal & Accounting Glossary
An itemized deduction is a deduction listed separately against a taxpayer’s adjusted gross income on his tax return. An itemized deduction allows the taxpayer to reduce his taxable income when he purchases an item or service that qualifies for a deduction. The effect of an itemized deduction is to reduce the amount of income on which the person is taxed. The alternative to an itemized deduction is to take the standard deduction, which is a predetermined deduction amount. Because the standard deduction is a large amount, anyone taking an itemized deduction(s) does so only if all his itemized deductions together are larger than the standard deduction. The itemized deduction is recorded on Schedule A and then transferred to one’s IRS 1040 form. A donation, a large medical expense, and state/local tax are examples of an itemized deduction.
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This glossary post was last updated: 9th February, 2020 | 0 Views.