When your itemized deductions combined are more than what the standard deduction for your filing status would be. There are two main types of tax breaks, the exemption and the deduction. An exemption is a specific amount that can be subtracted from your taxable income. On the other hand, deductions are specific expenses that the government allows you to subtract from your income therefore reducing the amount of taxes you pay. Deductions are applicable to certain situations.
Tax deductions save different people different amounts of money.
The primary indicator of what a deduction is worth to you is what tax bracket you are in. Only a small percentage of taxpayers are subject to AMT, and most that are are either wealthy or have a lot of deduction and tax shelters. First you calculate you taxes using the regular system, then you use the AMT system. If you choose to itemize your deduction rather than take the standard deduction, you must use Schedule A, Itemized Deductions. Schedule A is not very long and is broken down into several parts, such as medical expenses, Mortgage interest paid, etc.