What is the purpose of itemized deductions in the tax calculation process?

The purpose of itemized deductions in the tax calculation process is to determine taxable income. Itemized deductions allow taxpayers to reduce their taxable income by claiming specific expenses that qualify under tax law, such as mortgage interest, state and local taxes, medical expenses, and charitable contributions.

When taxpayers itemize deductions, they can subtract these expenses from their adjusted gross income (AGI) to arrive at their taxable income. This reduction can significantly impact the overall tax liability, as a lower taxable income generally leads to a lower tax obligation.

While the other possible answers touch on different aspects of the tax process, none directly address the primary function of itemized deductions. They do not reduce total income or increase AGI, nor are they used to calculate credit amounts. Instead, it's essential to focus on how itemizing affects the tax liability by providing a pathway to lower the taxable income.