Understanding the Difference Between the Standard Deduction and Itemized Deductions

Each tax season, many individuals face the same question: should they take the standard deduction or itemize their deductions? The choice can significantly affect taxable income and, ultimately, the amount of tax owed. Understanding how each method works, along with recent changes in tax law, can help taxpayers make an informed decision.

The Standard Deduction

The standard deduction is a fixed amount that reduces a taxpayer’s taxable income, simplifying filing by eliminating the need to track and report specific deductible expenses. The Internal Revenue Service (IRS) updates this amount periodically to account for inflation, and it varies based on filing status.

For the 2025 tax year filed in 2026, the standard deduction amounts are:

• Single or Married Filing Separately: $15,750

• Married Filing Jointly or Qualifying Surviving Spouse: $31,500

• Head of Household: $23,625

  
  

Taxpayers aged 65 and older can claim an additional standard deduction on top of the base amount. The extra deduction depends on filing status and whether the taxpayer is also blind: $2,000 for single or head-of-household filers ($4,000 if also blind) and $1,600 per spouse for married filing jointly or separately ($3,200 if also blind).

Additionally, from 2025 through 2028, individuals aged 65 and older can claim an additional $6,000 deduction, which is in addition to the existing standard deduction for seniors. For married couples where both spouses qualify, the total deduction can reach $12,000. The deduction begins to phase out for taxpayers with a modified adjusted gross income over $75,000 ($150,000 for joint filers). To qualify, a taxpayer must be 65 or older by the end of the taxable year. The deduction is available to both itemizing and non-itemizing taxpayers, and claimants must include the Social Security Number of each qualifying individual on the return and file jointly if married.

Because of its simplicity, most taxpayers claim the standard deduction, which can be especially advantageous for those whose deductible expenses are relatively low compared with the standard amounts.

Itemized Deductions

Itemizing deductions lets taxpayers list specific deductible expenses instead of taking the standard deduction. It’s usually worthwhile if your total deductions exceed your standard deduction amount.

Common itemizable expenses include:

• Mortgage Interest: Deductible for qualified home or home-equity loans, subject to limits based on loan size and date.

• Mortgage Insurance Premiums: Certain PMI or other mortgage insurance premiums may be deductible, depending on income limits and IRS rules for the year.

• State and Local Taxes (SALT): Includes state and local income or sales taxes (choose one), plus property taxes. Beginning in 2025, the total SALT deduction cap increases to $40,000 (up from $10,000).

• Charitable Contributions: Cash or property donations to qualified organizations are deductible with proper documentation.

• Medical and Dental Expenses: Only the portion of unreimbursed expenses exceeding 7.5% of adjusted gross income (AGI) is deductible.

• Casualty and Theft Losses: Usually deductible only for losses from federally declared disasters.

• Other Deductions: May include gambling losses (up to winnings) or investment interest, depending on current rules.

  
  

Itemizing typically requires more documentation and recordkeeping, such as receipts and tax statements, to substantiate each deduction. Taxpayers may find itemizing worthwhile if the total amount of their allowable deductions exceeds the standard deduction for their filing status.

When to Consider Each Option

Choosing between the standard deduction and itemizing is primarily a matter of comparing totals. If a taxpayer’s total itemized deductions exceed the standard deduction amount for their filing status, itemizing may result in lower taxable income. Conversely, if the total is lower, taking the standard deduction generally leads to a simpler and equally or more favorable result.

It is important to note that taxpayers cannot claim both the standard and itemized deductions in the same tax year. Additionally, married couples filing separately must make the same choice—if one spouse itemizes, the other must also itemize.

Example Scenario

Consider a single taxpayer with $7,000 in mortgage interest, $5,000 in state and local taxes, and $2,000 in charitable donations. These deductions total $14,000, slightly below the 2025 standard deduction of $15,750 for single filers. In this situation, taking the standard deduction would produce a slightly lower taxable income.

If the same taxpayer’s deductible expenses increased to $18,000, however, itemizing would yield a larger reduction in taxable income. The new $40,000 SALT cap could also make a difference for taxpayers with high property or state tax obligations.

State-Level Considerations

An additional layer of complexity arises from state tax systems. Some states allow taxpayers to itemize deductions on their state returns even if they take the standard deduction at the federal level. Others require the same choice for both federal and state returns. Taxpayers should review their specific state’s rules or consult a tax professional to understand how these differences may affect their overall tax liability. In certain states, itemizing at the state level can still provide meaningful tax savings even if the federal return uses the standard deduction.

Key Takeaways

Taxpayers should review their deductible expenses annually and compare the results of both approaches before filing. The choice between the standard deduction and itemizing is not fixed from year to year and can shift based on income, life events, or legislative changes. Maintaining organized financial records can help make this comparison easier when tax time arrives.

Conclusion

The decision to take the standard deduction or to itemize depends on a taxpayer’s unique financial circumstances and the interplay of federal and state tax rules. Both approaches aim to reduce taxable income, but they operate in different ways. With the higher SALT deduction limit beginning in 2025 and state-level differences in how itemizing is treated, it is increasingly important for taxpayers to evaluate both options carefully. Consulting a qualified tax professional can help ensure that deductions are applied correctly and that the chosen method results in the most accurate and beneficial tax outcome.

The information provided in this blog post is intended for general informational purposes only and should not be construed as legal or tax advice. While every effort has been made to ensure the accuracy of the information, tax laws and regulations are subject to change, and individual circumstances may vary. For personalized advice and to ensure compliance with current tax laws, it is strongly recommended that you consult with a qualified tax professional, financial advisor, or legal counsel. The author and publisher of this blog assume no responsibility for any errors or omissions, or for any actions taken based on the information contained herein.