Itemized Deductions vs. Standard Deduction

Itemized deductions and the standard deduction are two options that taxpayers can choose when filing their tax returns. The choice affects how much taxable income is reduced, potentially influencing the amount of taxes owed. The standard deduction is a fixed dollar amount that varies based on factors like filing status, while itemized deductions allow for a more customized approach by adding up specific eligible expenses, such as medical costs, mortgage interest or charitable donations. A financial advisor who specializes in tax planning could also help optimize your finances to lower your tax liability.

What Is the Standard Deduction?

The standard deduction is a set amount that reduces a taxpayer’s taxable income, available to most individuals when they file their federal income tax returns. This deduction requires no supporting documentation, making it a straightforward option for those who do not have significant itemizable expenses. 

The standard deduction amount is adjusted annually for inflation and is determined by one’s filing status-single, married filing jointly, head of household or married filing separately. The simplicity of the standard deduction often makes it an attractive choice for taxpayers who either do not qualify for numerous itemized deductions or find that their qualifying expenses fall below the set threshold. 

In addition to the standard deduction, taxpayers who are age 65 or older or blind can be eligible for an extra deduction amount. This additional deduction varies based on filing status and the specific condition(s) of the taxpayer. For the 2024 and 2025 tax years, the extra standard deduction amounts are as follows:

If a taxpayer is both 65 or older and blind, they can claim both additional amounts, effectively doubling the extra deduction. These additional deductions help further reduce taxable income, providing tax relief to eligible individuals. 

What Are Itemized Deductions?

Itemized deductions allow taxpayers to deduct specific expenses from their taxable income instead of taking the standard deduction. This approach can be advantageous if total eligible expenses exceed the standard deduction amount. 

Common expenses that qualify as itemized deductions include: 

• Medical and dental expenses that exceed a certain percentage of adjusted gross income (AGI) 
• State and local taxes (SALT) up to the federal cap
• Mortgage interest
• Charitable contributions
• Casualty losses (in federally declared disaster areas)

Unlike the standard deduction, itemizing requires that you provide detailed records and receipts to substantiate the deductions claimed. However, itemized deductions offer more flexibility for those with significant qualifying expenses, providing an opportunity to potentially lower taxable income beyond what the standard deduction offers.

When Should You Itemize Instead of a Standard Deduction?

Taxpayers often choose to itemize when their qualifying expenses exceed the standard deduction for their filing status. Itemizing often makes sense for those who have high medical expenses, substantial mortgage interest or large charitable contributions. 

For example, in 2025, a married couple filing jointly might find that their itemizable expenses, including $15,000 in mortgage interest, $10,000 in state and local taxes and $7,000 in charitable donations, total $32,000. Since this amount is greater than the $30,000 standard deduction for their filing status, itemizing would reduce their taxable income by an additional $2,000, leading to potential tax savings. 

Evaluating these expenses each year can help determine whether itemizing or taking the standard deduction is more beneficial.

How to Itemize Your Deductions

By following these steps, you can determine whether itemizing will offer a greater tax benefit when compared with claiming the standard deduction:

1. Gather receipts and records: Collect documentation for all deductible expenses, such as medical bills, mortgage interest statements, charitable contribution receipts and state/local tax records.
2. Fill out schedule A: Use IRS Form Schedule A to list your itemized deductions. This form is used to calculate the total amount of deductible expenses.
3. Compare against the standard deduction: Calculate your total itemized deductions and compare them with the standard deduction for your filing status. Choose the option that offers you the higher amount to reduce your taxable income as much as possible.
4. File your tax return: If you’re itemizing deductions, attach Schedule A to your Form 1040 when filing your tax return. Ensure all supporting documentation is organized in case of an IRS audit.

How Will the Standard Deduction Change in 2026?

The 2026 standard deduction could change dramatically. The Tax Cuts and Jobs Act (TCJA) significantly increased the standard deduction, but these changes are set to expire after tax year 2025 (filed in 2026). For 2026, unless Congress extends the provisions, the standard deduction will revert to lower pre-TCJA levels, which means that taxpayers may see a reduction in the amount they can deduct automatically. 

It is likely the deduction amounts will return to approximately half of what they are in 2026, reducing the overall benefit for many filers. This change will make it more advantageous for some taxpayers to consider itemizing again, especially if their qualifying expenses are substantial. Planning ahead and understanding how these shifts will impact your tax situation can help in making informed decisions about deductions.

Bottom Line

Whether you're opting for the simplicity of the standard deduction or the potential savings from itemizing, making an informed decision can lead to reduced taxable income and a better tax outcome. Keeping track of expenses and staying updated with tax law changes will help maximize deductions and minimize taxes owed.

Tax Planning Tips

• A financial advisor can help optimize your portfolio for taxes. Finding a financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you're ready to find an advisor who can help you achieve your financial goals, get started now.
• SmartAsset's tax return calculator with updated brackets and rates to see how your income, withholdings, deductions and credits will affect your next refund or balance due.

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