Standard Deduction vs Itemizing in 2025 - Lower your tax bill
Standard Deduction vs. Itemizing for 2025 Tax Year (file in 2026):
For the 2025 tax year (filed in 2026), choosing between the standard deduction and itemizing depends on your financial situation, expenses, and willingness to handle paperwork. The One Big Beautiful Bill Act (OBBBA), signed in July 2025, introduced changes that make this decision more impactful, especially for married couples and high earners. Below is a comprehensive look at both options, including new provisions, eligibility details, and strategic considerations.
Supplemental information: Video comparing standard deduction Vs Itemizing
Standard Deduction for 2025The standard deduction is a flat amount you can deduct from your adjusted gross income (AGI) to reduce taxable income, no questions asked. It’s the go-to for about 90% of taxpayers due to its simplicity and competitive size.
2025 Amounts (adjusted for inflation per IRS Rev. Proc. 2024-40):
Single or Married Filing Separately: $15,000 (up $400 from 2024’s $14,600)
Married Filing Jointly or Qualifying Surviving Spouse: $31,500 (up from $30,000, boosted by OBBBA)
Head of Household: $22,500 (up $600 from $21,900)
Additional Deductions for Age or Blindness:
Age 65+ or Blind: Add $1,600 per person for single filers or $3,200 for joint filers (per qualifying individual).
New Senior Deduction (OBBBA): An extra $6,000 for taxpayers 65+ through 2028, stackable with the standard deduction.
Example: A 67-year-old single filer gets $15,000 + $1,600 (age) + $6,000 (senior) = $22,600 total standard deduction.
Pros:
No need to track or justify expenses.
Faster tax prep, lower audit risk.
Often exceeds itemized deductions for those with modest expenses.
Cons:
You miss out if your itemizable expenses exceed the standard deduction.
Fixed amount, so high spenders in certain categories may benefit more from itemizing.
Itemizing for 2025 Itemizing involves listing specific deductible expenses on Schedule A of Form 1040. You only itemize if the total exceeds your standard deduction. This option suits taxpayers with significant deductible expenses, like homeowners or those in high-tax states. Key Itemized Deductions for 2025
Mortgage Interest:
Deductible on up to $750,000 of mortgage debt for primary or second homes ($375,000 if married filing separately).
Applies to interest paid in 2025, not principal.
Includes home equity loan interest if used for home improvements.
State and Local Taxes (SALT):
OBBBA Change: Starting in 2025, the cap rises to $40,000 through 2029, with a phaseout for incomes above $500,000.
Charitable Contributions:
Cash donations to qualifying charities deductible up to 60% of AGI.
Non-cash donations (e.g., goods, stocks) have specific rules; appraisals may be needed for large gifts.
Medical Expenses:
Deductible if exceeding 7.5% of AGI (e.g., for AGI of $100,000, only expenses over $7,500 qualify).
Includes doctor visits, prescriptions, and certain long-term care costs.
Casualty and Theft Losses:
Deductible only for federally declared disaster losses, exceeding 10% of AGI per event (rarely used).
Other Deductions (less common):
Gambling losses (up to gambling winnings).
Certain job-related expenses for specific professions (e.g., reservists, performing artists).
New for 2025 (OBBBA Provisions):
Overtime/Tip Income Deduction: Workers earning overtime or tips can claim an additional deduction (details pending IRS guidance).
Vehicle Interest Deduction: Interest on loans for personal vehicles may be deductible, aimed at middle-income taxpayers (limits TBD).
These new deductions can be itemized or, in some cases, taken as above-the-line adjustments, benefiting even standard deduction filers.
Pros of Itemizing:
Potentially larger deduction if expenses exceed standard deduction (e.g., a single filer with $18,000 in mortgage interest + SALT + charity beats $15,000 standard).
No overall cap on itemized deductions (unlike pre-2018 Pease limitation).
Ideal for high earners, homeowners, or those in high-tax states (especially post-2025 with higher SALT cap).
Cons of Itemizing:
Requires detailed records (receipts, statements, etc.).
Time-consuming and may increase audit risk, especially for large deductions.
If one spouse itemizes (married filing separately), the other must too, complicating coordination.
How to Choose: Standard Deduction vs. Itemizing
Add up potential itemized deductions (mortgage interest, SALT, charity, medical, etc.).
Compare to your standard deduction amount.
Example: A married couple (both under 65) with $20,000 mortgage interest, $10,000 SALT, and $5,000 charity = $35,000 itemized > $31,500 standard → itemize.
Standard deduction vs itemizing is a conversation you should have with your tax professional during your tax planning sessions in the beginning of the year. This conversation is a good starting point for effective tax planning to minimize your year end tax liability. If you or someone you know is in search of a 2025 or 2026 tax planning session, do not hesitate to reach out.
