What are itemized deductions?

Itemized deductions are specific expenses that taxpayers can claim on their tax returns to reduce their taxable income. These deductions are detailed and include a variety of qualifying expenses, such as medical expenses, mortgage interest, property taxes, charitable contributions, and certain unreimbursed job expenses. By itemizing deductions, taxpayers can potentially lower their overall tax liability, as these deductions decrease the amount of income that is subject to taxation.

The other choices incorrectly define itemized deductions. Business expenses are separate from itemized deductions and relate specifically to expenses incurred for running a business. Not all taxpayers can claim itemized deductions, as it often depends on their total eligible expenses exceeding the standard deduction; thus, it is not exclusive to high-income earners. Lastly, itemized deductions directly impact taxable income by reducing it, contrary to the assertion that they do not affect it. This highlights the importance of understanding the specific nature and function of itemized deductions in the broader context of tax preparation and planning.