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The Average American Taxpayer Who Did This Got a $26,812 Tax Deduction

By Dan Caplinger - Feb 7, 2016 at 7:40AM

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Filing this form might save you a bundle. Image: IRS.

Doing your taxes is a complicated task, and often, taxpayers will look for ways to save time and effort even if it costs them some money. Given how much recordkeeping and added hassle there can be in itemizing your deductions, you might be tempted just to take the standard deduction and avoid the need to file additional tax forms and keep records. But taxpayers who do itemize on average get a much bigger tax break than the standard deduction provides, and that makes it at least worth the effort of seeing whether itemized deductions would cause you to pay much less in tax than taking the easy way out.

Should you itemize?
Most people who itemize deductions do so because they can deduct more than the standard deduction would give them. For the 2015 tax returns that Americans are filing now, the standard deduction amounts are listed below.

Filing Status

Standard Deduction Amount

Single

$6,300

Married Filing Jointly

$12,600

Head of Household

$9,250

Source: IRS.

Most people go ahead and claim the standard deduction. Out of about 145 million total returns in the most recent year for which IRS data are available, almost 101 million claimed the standard deduction. Those deduction amounts added up to $848.6 billion, and that worked out to an average of $8,411 for every return that took the standard deduction.

However, those who itemized got much larger deductions. The 44.3 million taxpayers who itemized deducted a total of $1.19 trillion, amounting to an average of $26,812 per taxpayer.

What were the most common itemized deductions?
There are a large number of items you can deduct. But the vast majority of taxpayers itemize deductions in three primary areas.

The most commonly taken itemized deduction was for state and local taxes. The recent law change that has allowed those who live in states that don't charge an income tax to deduct sales taxes instead has made this nearly a ubiquitous deduction among those who itemize, and the data show that more than 95% of itemizers included a number in this line. The average deduction on this line was $7,520, adding up to more than $320 billion in deductions nationwide.

Home-related deductions weren't quite as common, but they produced much more tax savings. Home mortgage interest and mortgage insurance premiums added up to more than $300 billion in deductions, and real-estate tax deductions saved homeowners another $174 billion. About 37.8 million taxpayers deducted real-estate taxes, and around 33 million took deductions for some form of mortgage interest or insurance premium. Those amounts averaged out to $12,656 for everyone who took them.

Finally, gifts to charity made up a huge portion of the itemized savings. More than 36.4 million taxpayers deducted a total of almost $195 billion, working out to an average of $5,343 per return claiming the deduction.

These three areas weren't the only ones where deductions were available. Medical expenses are a huge category, although they're deductible only to the extent they exceed 7.5% to 10% of your adjusted gross income. Losses from theft or events such as natural disasters are also eligible for itemizing to the extent that they exceed $100, as are unreimbursed employee expenses, tax preparation fees, and other miscellaneous deductions if they add up to more than 2% of your adjusted gross income.

Do the math
Itemizing can seem like a hassle, but for some taxpayers, the deductions they'll get will save them thousands of dollars on their tax bill. Running the numbers to see if it pays to itemize can be well worth the effort.

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