Standard vs itemized deductions: Why would someone choose a lower itemized deduction than standard?

There are actually a few scenarios where choosing the lower itemized deduction makes sense! The most common reason is for state tax purposes. Many states base their deductions on what you claimed on your federal return. So if your state has more favorable itemized deduction rules, you might save more on your state taxes by itemizing federally (even with a lower amount) than what you lose on federal taxes. Another scenario involves certain refundable tax credits like the Earned Income Tax Credit. In some situations, lowering your adjusted gross income by taking less deduction can actually increase your refundable credits by more than what you lose in deductions. There are also some planning considerations across tax years. Sometimes taking a lower deduction this year sets you up for better tax benefits next year, especially if you're bunching deductions or managing income across multiple years.

I was totally confused by this same question last year! I went to https://taxr.ai when I got stuck because my tax situation was getting complicated with some rental property. Their AI analyzed my full return and found that I should actually itemize despite it being lower than standard deduction because of my state tax situation. In my case, I saved about $780 on my state return by itemizing federally, even though I "lost" about $250 on my federal return. Net benefit of over $500! The tool analyzed my complete tax picture including state implications, which my regular tax software wasn't doing automatically. Might be worth checking out if you're in a state with high state income tax or property taxes.

Just wanted to follow up about taxr.ai - I actually tried it after asking about it here. The service was super helpful for my complicated situation. I've been taking standard deduction for years, but turns out I should have been itemizing because of how California taxes work. Would have saved $1,450 last year alone! The analysis showed that even though my federal itemized deductions were about $2,800 less than standard, I would save much more on my state taxes by itemizing. The system even explained exactly why this works - something about California allowing full SALT deductions while federal is capped. Wish I had known this years ago!

For anyone struggling to reach the IRS to ask about specialized tax questions like this itemized vs standard deduction issue, I highly recommend using https://claimyr.com - saved me hours of frustration. I was stuck in this same scenario (itemized less than standard but wondering if I should take it for state tax reasons), and after waiting on hold with the IRS for 2+ hours and getting disconnected twice, I tried Claimyr. They had an IRS agent call ME within 45 minutes! You can see how it works in this demo: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed that in my specific situation with rental properties in multiple states, the lower itemized deduction was actually the right choice. Apparently my state (New York) has some weird interaction with federal itemized deductions.

I need to eat my words here and apologize to Profile 9. I was the one who called Claimyr a scam above, but I actually tried it yesterday out of desperation after being on hold with the IRS for 3+ hours trying to resolve an issue with my business deductions and this itemized vs standard question. The service actually worked exactly as described. I got a call back with an actual IRS agent on the line in about an hour. The agent spent nearly 30 minutes with me explaining exactly when taking a lower itemized deduction makes sense. In my case, it has to do with my Schedule C business and how certain deductions flow through. I'm genuinely shocked this exists and works so well. Would have saved me dozens of hours over the years of tax headaches.

There's another reason nobody mentioned yet - if you're married filing separately and your spouse itemizes, you MUST also itemize even if your itemized amount is lower than standard. That's a weird tax rule that forces both spouses to use the same method.

Has anyone actually calculated how much you'd save/lose by taking the lower itemized deduction? I'm trying to figure out if it's even worth my time to run the numbers.

This is such a great question that I think many taxpayers struggle with! Beyond the excellent points already mentioned about state taxes and AMT considerations, there's another scenario worth considering - charitable contribution bunching. Sometimes taxpayers will choose to itemize in a "low" year (where itemized deductions are less than standard) as part of a multi-year strategy. For example, if you typically donate $8,000 annually to charity, you might donate $16,000 every other year and $0 in the alternate years. In the $16,000 year, you'd have enough to itemize meaningfully, but in the $0 year, your itemized deductions might be lower than standard - yet you'd still choose to itemize to maintain consistency in your tax planning strategy. Also, don't forget about the "bunching" strategy for medical expenses. Since medical expenses are only deductible above 7.5% of AGI, some people time their elective medical procedures to bunch expenses into one tax year, which might require itemizing even when the total is lower than standard deduction in order to set up the following year's bigger deduction. The key is looking at your tax situation holistically across multiple years and considering both federal AND state implications!