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Who Itemizes Deductions?

Daniel Baneman, Benjamin H. Harris

Published: January 20, 2011
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Abstract

Many taxpayers can lower their taxable income by itemizing deductions, which in turn lowers tax liability. Itemized deductions reduce tax burdens for taxpayers with decreased ability to pay taxes, such as those experiencing a catastrophic loss, or for taxpayers who spent funds on activities the tax code deems worthwhile, such as contributing to charity. In recent years, the largest itemized deductions were those for mortgage interest paid, state and local taxes paid, and charitable contributions.

The text below is an excerpt from the complete document. Read the entire report in PDF format.


Many taxpayers can lower their taxable income by itemizing deductions, which in turn lowers tax liability. Itemized deductions reduce tax burdens for taxpayers with decreased ability to pay taxes, such as those experiencing a catastrophic loss, or for taxpayers who spent funds on activities the tax code deems worthwhile, such as contributing to charity. In recent years, the largest itemized deductions were those for mortgage interest paid, state and local taxes paid, and charitable contributions.

Taxpayers may either claim a standard deduction or itemize deductions separately. In 2010 the standard deduction was $5,700 for single filers and $11,400 for married filers. More taxpayers claim the standard deduction than itemize: Tax Policy Center estimates that about 70 percent of taxpayers will claim the standard deduction on their 2010 tax returns.

Taxpayers in higher tax brackets are more likely to itemize than those in lower brackets (see table). Just 3.9 percent of taxpayers in the 0 percent bracket and 16.2 percent of taxpayers in the 10 percent bracket itemize. In sharp contrast, 70.9 percent of taxpayers in the 33 percent bracket and 89.4 percent of taxpayers in the 35 percent bracket itemize. Almost all taxpayers on the alternative minimum tax itemize.

End of excerpt. The entire report with graphs and footnotes is available in PDF format.