To itemize or not to itemize? Here's the answer:

Taxpayers have a choice of taking the standard deduction or itemizing their deductions. If itemizing certain expenses results in a greater refund, then file Schedule A and claim the greater deduction on line 40 of Form 1040.

First you have to determine your standard deduction based on your filing status. For 2010, they are:

• Single $5,700
• Married Filing Jointly $11,400
• Head of Household $8,400
• Married Filing Separately $5,700
• Qualifying Widow(er) $11,400
• Note: If the taxpayer is 65 or older, totally or partially blind, or their exemption can be claimed by another taxpayer, you must use the Standard Deduction Worksheet.
  
  If you are partly blind, you must get a certified statement from an eye doctor or registered optometrist that:
  
  • You cannot see better than 20/200 in the better eye with glasses or contact lenses, or
  • Your field of vision is not more than 20 degrees.
  If your eye condition will never improve beyond these limits, the statement should include this fact. You must keep the statement in your records. If your vision can be corrected beyond these limits only by contact lenses that you can wear only briefly because of pain, infection, or ulcers, you can take the higher standard deduction for blindness if you otherwise qualify.

A few notes about itemized deductions:

• Can only be claimed on Form 1040
• If a married taxpayer files a separate return and spouse itemizes deductions the standard deduction is zero and the taxpayer should itemize any deductions he/she has. 
• Nonresident or dual-status aliens must itemize their deductions.
• Starting in 2010, itemized deductions are no longer limited because of your adjusted gross income.

Generally the most common reason for itemizing is home ownership because mortgage interest and real estate taxes are itemized deductions. Both of these are usually reported on Form 1098.

Other itemized deductions include:

• Large medical and dental expenses (limited to those that exceed 7½% of your AGI for the year). Note: the 7½% increases to 10% in 2013 (2017 for seniors)
• State and Local Income or General Sales Taxes - These include state and local income taxes, property taxes on real estate, intangible taxes (on the value of stocks and bonds you own) and on personal property taxes on such things as cars
• Charitable contributions are generally limited to 50% of your AGI, but in certain circumstances the limit can be as little as 20% or 30% of AGI
• Miscellaneous employee business expenses and investment expenses, but only to the extent that they exceed 2% of your AGI
• Casualty losses in excess of 10% of $100 per occurrence plus your AGI, and
• Gambling Losses up to the amount of winnings; Hobby expenses up to the amount of earnings