Standard Deduction Vs. Itemized Deductions - Explained
🌡️ Understanding Standard VS. Itemized Deductions
The Standard Deduction is the amount the government allows you to remove from your taxable income without having to track receipts.
Itemized Deductions are when you have certain allowable deductions and your total is greater than the standard deduction.
Before 2017…
The standard deduction was about $6,500/person.
If you wanted to claim more(by itemizing your deductions), you had to add up all of your receipts for the year – Car Mileage, Toll, Dry Cleaning, Work Uniforms, etc.
Then, in 2017…
The government doubled the standard deduction.
They removed “Unreimbursed work expenses”. No need to add up receipts anymore. Only a few items count towards itemizing.
For 2026, the standard deduction will be…
$16,100 for a single person.
$32,200 for a married couple.
$24,150 for Head of Household.
Seniors will get an additional $6,000 standard deduction per person through 2028.
In order to itemize, you must have more deductible expenses than the total above. Otherwise, the government allows you to take the standard deduction as a write off against your income.
Below is a screenshot of items that may help you itemize. We discuss additional items added for 2026 further below. The items below the red box come in to play so rarely that we don’t discuss them here.
🚑 Medical Expenses
Medical Expenses can come into play, but it is complicated…
First – Only out of pocket expenses that are greater than 7.5% of your Adjusted Gross Income count towards itemized deductions.
If a single filer makes $100,000 and has $8,000 in medical expenses.
7.5% of AGI would be $7,500. Only the money above that, $500, gets added to itemized deductions.
Next – total itemized deductions still have to exceed the standard deduction.
The higher your income, the less likely medical expenses will come into play. But if you have an irregular year, make sure you keep track.
🎯 State And Local Taxes (Also known as SALT)
SALT Taxes – You will hear this term a lot. It stands for State And Local Taxes. And it includes 3 items (shown above)…
- Income or Sales Tax
- Real Estate Taxes
- Personal Property and other taxes.
The big challenge here is that SALT taxes are CAPPED, meaning that you can only claim a portion of them as itemized deductions. Until recently, that CAP was $10,000. So if you paid $15,000 in property taxes, and $10,000 in state income taxes, you could not add the entire $25,000. Only $10,000 total would go toward your itemized deductions.
2026 – O.B.B.B.A Update
The Big Beautiful Bill is raising the SALT deduction CAP from $10,000 (in 2025) to $40,400 for 2026, which should help a lot of home owner’s (especially married couples with larger homes) be able to itemize deductions again. One caveat – this higher cap phases back down for high earners. It starts shrinking once your income passes about $505,000 and can fall all the way back to $10,000, so the biggest benefit lands on middle and upper-middle income homeowners.
🏠 Mortgage Interest
Interest Paid(On your Primary Residence) – Mortgage Interest is usually the one that will help push people into itemizing. The interest on your mortgage is deductible, not the full mortgage payment.
Mortgage interest is capped now as well.
Mortgages put into place prior to December 15, 2017 can claim interest on up to 1 Million in mortgage debt
After that, you may only claim interest paid on the first $750,000 of outstanding mortgage debt.
If you refinanced after the date, your limit is 750K.
🆕 New for 2026 – Mortgage insurance (PMI) is deductible again. If you put down less than 20% and pay PMI, FHA, VA, or USDA mortgage insurance, those premiums count as deductible mortgage interest again starting in 2026. Two catches – you have to itemize to use it, and it phases out fast (fully gone by $110,000 of income for a single filer), so it mainly helps lower-income homeowners. For more on how a home affects your taxes, see How does buying a home help my taxes?
🎗️ Charitable Contributions
These are broken into 2 types.
Please note that giving money to GoFundMe or other people is not a deductions. They must be registered charitable organizations.
Cash – You can contribute up to 60% of your gross income as an itemized deduction as long as you have receipts to show them. If you donate money to a charity, save your receipts.
Non Cash – Items you donate to Good will. Every time you donate, grab a receipt and estimate the re-sale value (not the retail value) of the items donated.
The IRS allows up to $500 in non cash donations without receipts.
Up to $5,000, you can provide your own own valuations of items donated.
Above $5,000 you need to have the charity provide you with a receipt of estimated value.
🆕 New for 2026 – Two big charitable changes.
You no longer have to itemize to get a break. Starting in 2026, you can deduct up to $1,000 (single) or $2,000 (married filing jointly) in cash donations even if you take the standard deduction.
If you DO itemize, a new floor applies – only the portion of your giving above 0.5% of your income counts. So on $200,000 of income, the first $1,000 of donations no longer adds to your itemized deduction.
🆕 New Deductions in 2026 – Trump Changes
The Big Beautiful Bill introduced a few additional deductions…
1. No Tax On Tips
No income tax on the first $25,000 in tips.
Social Security & Medicare taxes still apply.
This phases out above $150,000 for Single Filers & $300,000 if married.
These tips must be reported on the W-2. Unreported tips don’t qualify.
2. No Tax On Overtime
You may deduct the ‘overtime premium’ (the additional amount earned) from your taxable wages.
Not exempt from Social Security & Medicare
Capped at $12,500 for single filers and $25,000 for married filers.
This phases out above $150,000 for Single Filers & $300,000 if married.
3. Auto Loan Interest Deduction
This one is known as ‘Above The Line’ meaning you can take it even if you don’t itemize. Capped at $10,000. Only the interest counts, not your full car payment.
To qualify…
New (not used) vehicle loan originated after December 31, 2024.
Personal use only, not business or fleet
Assembled in the U.S. (final assembly must be in the United States)
Must be under 14,000 lbs. weight
Phase out for the deduction begins after $100,000 for Single Filers and $200,000 if married. The savings from this will be very minor.
4. Seniors (65+) Deduction: Additional $6,000 deduction per senior, available to both standard and itemizing filers, with income phase-out starting at $75,000 (single) or $150,000 (joint).
🤔 Parting Thoughts
You have probably heard the quote – “Don’t step over dollars to pick up dimes.”. When it comes to taxes, the reverse is true. Don’t spend a dollar to save 30% of it. Here is what that means…
The Standard deduction is big now, so…
Don’t buy a house “To get the tax deduction”. Buy a house because it suits you and your family’s needs and will increase your quality of life.
Don’t donate to charity for the deduction. Donate because it is something you care about.
Remember that when you spend money for a tax deduction, you do not save the entire amount. You only save the % you would have owed in taxes.
Example…
A $100,000 earning couple ends up in a 22% tax bracket. This means that until they drop to a lower tier(In this case $89,450), each dollar is taxed at 22%.
Let’s say they decide to donate $1,000 to church (and they are itemizing deductions) They reduce taxable income by $1,000. However, that money was only going to be taxed at 22% (Or $220).
The above does not mean that there are no ways to save on taxes. There are lots – pre-tax retirement contributions are one of the biggest (see Should I contribute to retirement?). But in general, increasing itemized deductions is not the way to get tax efficient.
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If you have any additional questions, please reach out. We help individuals and businesses year-round with personal and business tax services.
Thanks,
– Taxman