The Big Three Itemized Deductions – Interest Expense, State and Local Taxes, and Charitable Contributions

I call these Itemized Deductions the "Big Three" because virtually every itemizing taxpayer will have significant deductions in each of these three categories.  For reasons mentioned later in this section, other possible Itemized Deductions are generally not available to the typical itemizer.

The Example I just gave you on the tax advantages of home ownership has already generally discussed two of the "Big Three" of Itemized Deductions.  As I illustrated for you in the Example, the mortgage interest expense and local property taxes alone are often enough to make an itemizer out of the typical American.  Anything else we can add to our Itemized Deductions is icing on the cake.  Let's look a little more closely at the Big Three to make sure we are optimizing everything legally available.

Later in this Tax Planning section, we will look at the actual tax form for computing Itemized Deductions (the Schedule A to the Form 1040).  Initially, however, I want to make sure you understand the underlying concepts – the theory – of the major Itemized Deduction categories.