If you have certain expenditures each year, such as extraordinary medical bills, charitable contributions or mortgage interest, you might want to itemize these on your state income tax return to reduce the taxes you owe. If your expenditures exceed your state's standard deduction, it's worth deducting them by itemizing taxes, even if you don't have enough itemized deductions to surpass the federal standard deduction. Be sure to check your state's tax rules, however, as not all states give you the option to itemize expenses on your state return.
Depending on your state of residence, you may be able to itemize taxes on your state return regardless of whether or not you itemized your federal return. While this is certainly a possibility, you should first consult with your state's Department of Revenue to identify any unique filing requirements for your location.
Standard Deductions vs Itemized Deductions
When completing your state and federal income tax returns, you'll find that each allows a "standard deduction" meant to give you a tax break for certain expenditures. At the state level, this standard deduction varies but is likely lower than the federal standard deduction. At the federal level for tax year 2017, the standard deductions ranged from $6,350 for filers with Single status, up to $12,700 for Married Filing Jointly status and Qualifying Widow(er) status. These figures nearly double for all filing statuses beginning with the 2018 tax year due to new tax reforms. The standard deduction and itemized deduction difference is that with standard deduction you take a predetermined deduction, with itemized deduction, you are able to write off each deduction for which you're eligible. Because of the higher 2018 standard deduction, fewer taxpayers are expected to itemize on their 2018 taxes.
State Income Tax Return Rules
According to the Institute on Taxation and Economic Policy, for tax year 2016, 31 states plus the District of Columbia allowed tax filers to itemize expenses on their state income tax returns, following the deductions allowed at the federal level. Some states overlay their own guidelines and limitations on the maximum deductible expenses. Ten states do not allow this type of itemization, and instead have their own tax rules that provide deductions for every taxpayer in the state, not just those that itemize.
Itemize Deductions on the State Level
If the itemized deductions for your state income tax return equate to less than your federal standard deduction, you could itemize on your state taxes, but wouldn't necessarily want to itemize on your federal taxes. California, for example, allows taxpayers to itemize on their state taxes, whether or not they itemize on their federal return. Since each state has its own tax rules and allowable deductions, check with your state's department of revenue for current procedures on itemizing at the state level, and what that means for your federal tax return.
Following the Federal Precedent
Some states follow the precedent set by your federal income tax filing. For example, if you're filing an income tax return in the state of Georgia, what you do on your federal return dictates how you file your Georgia state return. If you itemize at the federal level or have a spouse that itemizes if you're married but filing separately, you must also itemize on your state income tax return. Conversely, if you take the standard deduction on your federal tax return, you must also take the standard deduction on your Georgia income tax return, even though it may be significantly lower than the federal standard deduction.
- Institute on Taxation and Economic Policy: State Treatment of Itemized Deductions
- Georgia Department of Revenue: 2017 Individual Income Tax 500 and 500EZ Forms and General Instructions
- Forbes: IRS Announces 2018 Tax Rates, Standard Deductions, Exemption Amounts And More
- IRS: Taxpayers Can Choose to Itemize or Take Standard Deduction for Tax Year 2017
- The Tax Policy Center. "What Are Itemized Deductions and Who Claims Them?" Accessed Feb. 19, 2020.
- IRS. "SOI Tax Stats — Tax Stats-at-a-Glance." Accessed Feb. 19, 2020.
- IRS. "Standard Deduction." Accessed Feb. 19, 2020.
- IRS. "Publication 501 (2019), Dependents, Standard Deduction, and Filing Information." Accessed Feb. 19, 2020.
- IRS. "Topic No. 503 Deductible Taxes." Accessed Feb. 19, 2020.
- IRS. "Publication 936 Home Mortgage Interest Deduction." Page 1. Accessed Feb. 19, 2020.
- IRS. "Topic No. 515 Casualty, Disaster, and Theft Losses." Accessed Feb. 19, 2020.
- IRS. "Publication 529 (12/2019), Miscellaneous Deductions." Accessed Feb. 19, 2020.
Cynthia Gaffney has spent over 20 years in finance with experience in valuation, corporate financial planning, mergers & acquisitions consulting and small business ownership. She has worked as a financial writer for online finance publications since 2011, including eHow Money, The Motley Fool, and Sapling.com. She has also edited for several online finance publications, including The Balance, Opposing Views:Money, Synonym:Money, and Zacks.com. A Southern California native, Cynthia received her Bachelor of Science degree in finance and business economics from USC.