Standard Deduction or Itemizing

Every return makes one choice before anything else: take the standard deduction or add up your itemized deductions and use the larger figure. Most households take the standard deduction without a second look, and most of them are right. But the 2025 tax law raised the cap on state and local taxes, added new deductions that sit on top of either choice, and changed how charity counts, so a household that stopped checking years ago may now be leaving money on the table. This chapter explains what a deduction is actually worth, the 2026 amounts, what can be itemized, and how to time expenses so the choice works harder for you.

What a deduction is worth to you

A deduction does not cut your tax by its own size. It cuts the income the tax is worked out on, so it saves you your marginal rate, the rate on your last dollars of income, and nothing more.

A single filer with $85,000 of wages takes the standard deduction of $16,100, is taxed on $68,900, and owes $9,870 in federal income tax. The top bracket reached is 22.0%. If extra deductions bring the income taxed down to what it would be at $80,000 of wages, the tax becomes $8,770. Every dollar of that deduction saved 22.0% of a dollar, the marginal rate.

Two consequences follow. A deduction is worth more to someone in a higher bracket, and an expense is never "free" because it is deductible: you still spend the full dollar to save a fraction of it. The tax bracket calculator shows which rate your next dollar of income meets.

The 2026 standard deduction

The standard deduction is a flat amount you subtract without receipts. For 2026 it is $16,100 for a single filer, $24,150 for a head of household, and $32,200 for a married couple filing jointly.

Two additions apply on top of it.

• Age 65 or older, or blind. Each qualifying person adds $2,050 if unmarried, or $1,650 per qualifying spouse on a joint return. Someone who is both 65 and blind counts twice.
• The senior deduction, 2025 to 2028. Each person aged 65 or older can also deduct up to $6,000, whether or not they itemize. It shrinks by 6% of modified adjusted gross income above $75,000 for a single filer or $150,000 for a joint return, and it is scheduled to end after 2028 unless Congress extends it.

Married couples filing separately must both itemize if either does, which is one of several reasons that status rarely helps.

What you can itemize

Itemizing means listing specific expenses on Schedule A. Only a few categories carry most of the weight.

State and local taxes (SALT). State and local income tax (or sales tax, if you choose it instead) plus property tax. For 2026 the total you can deduct is capped at $40,400. The cap shrinks by 30% of modified adjusted gross income above $505,000, but never below $10,000. The cap is half as large for married people filing separately. The 2025 law sets the cap to rise by 1% a year through 2029 and then return to $10,000 in 2030, so this is a rule worth rechecking each year.

Mortgage interest. Interest on debt used to buy, build or substantially improve your main home or a second home, on up to $750,000 of debt for loans taken out after December 15, 2017. Interest on a home equity loan counts only when the money went into the home itself, not to pay off cards or buy a car.

Charitable gifts. Cash and property given to qualified charities. From 2026 an itemizer can deduct only the part of their gifts above 0.5% of adjusted gross income, and cash gifts are limited to 60% of income. Chapter 2 covers giving in detail.

Medical and dental expenses. Only the part above 7.5% of adjusted gross income counts. That floor is high enough that this deduction mostly matters in a year with a large bill: surgery, long-term care, fertility treatment, or premiums paid with after-tax money. Qualifying costs include insurance premiums you pay yourself, prescriptions, dental and vision care, hearing aids, and mileage to appointments. IRS Publication 502 has the full list.

Smaller items. Casualty losses from a federally declared disaster, gambling losses up to gambling winnings, and a few others. Unreimbursed employee expenses and tax preparation fees are no longer deductible for most people; the 2017 law suspended them and the 2025 law made that permanent.

Add up your own figures with the standard vs itemized deduction calculator, which applies the 2026 SALT cap, the charity floor and the medical floor for you.

Deductions you get either way

The 2025 law added deductions that do not depend on the choice above. They are taken on top of the standard deduction or itemized deductions, and they reduce taxable income without lowering adjusted gross income. All four run for tax years 2025 through 2028.

• Qualified tips, up to $25,000, for workers in occupations that customarily receive tips.
• Qualified overtime, the premium part of overtime pay (the "half" in time-and-a-half), up to $12,500, or $25,000 on a joint return.
• Car loan interest on a qualifying new vehicle assembled in the United States and bought for personal use, up to $10,000 a year.
• The senior deduction described above.

Each phases out at higher incomes, and each has eligibility rules the IRS is still clarifying through notices. The new tax deductions calculator shows what each is worth at your income.

Bunching: making itemizing pay every other year

Many households land just under the standard deduction every year. Their mortgage interest, state taxes and giving come close, but not close enough, so itemizing adds nothing. Bunching changes the timing: put two years of flexible deductions into one year and itemize, then take the standard deduction the next year.

A married couple with $160,000 of income owes $17,540 with the standard deduction. Suppose their regular deductions come to about the standard deduction each year. In the year they pay two years of charitable gifts and, where the timing rules allow, an extra property tax installment, their itemized total rises well above the standard deduction. If that brings the income taxed down to what it would be at $145,000, the tax that year is $14,240. The following year they take the standard deduction again and pay $17,540. Over two years they pay $14,240 plus $17,540 instead of $17,540 twice, while giving the same total.

What can be bunched:

• Charitable gifts, most easily through a donor-advised fund, which gives the deduction in the year you fund it and lets you send grants to charities over later years.
• Property tax, by paying an installment that has been assessed before December 31. You cannot deduct a prepayment of tax that has not yet been assessed, and the SALT cap limits how much this can help.
• Elective medical care, by scheduling it into one year so more of it clears the 7.5% floor.

Bunching works best when the two-year total of flexible deductions is large relative to the standard deduction. When it is small, the standard deduction every year is simpler and costs nothing.