The Average American's Tax Deductions by Income

By Matthew Frankel Markets Fool.com

We're a few months into tax season, and many people have already filed their returns, while others are still gathering documentation. As you go through the process, you may be wondering how much the average American's tax deductions are and how you compare. Here are the average amounts of Americans' most common deductions, and why it's important for you as a taxpayer to know this information.

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The biggest itemized tax deductions

There are many items that are potentially deductible on your tax return, from unreimbursed business expenses to car taxes you pay each year, but the largest deductions used by most Americans are in these four categories:

  • Medical expenses in excess of 10% of AGI (7.5% for taxpayers over 65)
  • State and local income taxes paid
  • Mortgage interest
  • Charitable contributions

Charitable contributions are among the most common tax deductions. Image source: Getty Images.

The average American's tax deductions

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Each year, the IRS releases a breakdown of data from the tax returns it processes. Recently, the agency released its preliminary data for the 2015 tax year -- that is, the tax returns filed and processed in 2016. So, here's the latest picture of how large the average American taxpayer's deductions are.

AGI Range

Medical Expenses Deduction

State/Local Income Taxes

Mortgage Interest

Charitable Contributions

Under $15,000

$9,210

$937

$6,374

$1,533

$15,000 to $30,000

$8,646

$1,039

$6,300

$2,483

$30,000 to $50,000

$8,761

$1,650

$6,011

$2,812

$50,000 to $100,000

$9,426

$3,195

$7,007

$3,244

$100,000 to $200,000

$11,305

$6,464

$8,886

$4,155

$200,000 to $250,000

$17,625

$11,226

$11,304

$5,779

Over $250,000

$37,032

$41,621

$15,160

$21,769

Data source: IRS.

It's important to note that only about 30% of taxpayers choose to itemize deductions on their tax returns, with the rest opting for the standard deduction instead.

Also, these are the averages among itemized returns that claimed each type of deduction. For example, only 19% of itemized returns claimed a deduction for medical expenses, and of those returns that claimed the deduction, these are the average amounts that were claimed. Here are the percentage of itemized tax returns that claimed each type of deduction for the 2015 tax year.

Deduction Type

Percentage of Returns Claiming

Medical Expenses

19%

State and local income taxes

96%

Mortgage interest

73%

Charitable contributions

82%

Data source: IRS.

Why it matters to you

One big reason this information is important is because the IRS uses the averages to decide who gets audited. Some audits are indeed random, but many are triggered by a certain piece of data that sets off red flags. Having a deduction that is much larger than average certainly qualifies.

For example, according to the chart, the average American with AGI of $80,000 can be expected to take a $3,244 charitable deduction. So, if you deduct $3,500 worth of contributions, it may not set off any alarms at the IRS. On the other hand, if you claim a $10,000 deduction, it could prompt a second look.

It's also important to note that some deductions are uncommon in any amount, which could also set off bells at the IRS. The medical expenses deduction is a good example of this -- since it only applies to expenses greater than 10% of a taxpayer's AGI, a relatively low number of taxpayers qualify for this one, especially in the higher income brackets.

For example, in order to claim a medical expenses deduction if you're in the $200,000-$250,000 AGI range, this means that you had unreimbursed medical expenses for the year in excess of $20,000. Not surprisingly, just 4% of taxpayers in this range who itemize claim a deduction for medical expenses.

Now, you should claim every penny you're entitled to -- just be aware that the chance of an audit increases if your deductions are far from the norm, and if they are, it becomes doubly important to be sure you can adequately document every deduction you take.

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