Standard vs Itemized Deductions: Which Should You Choose in 2025?

Understanding the Standard Deduction

The standard deduction is a fixed dollar amount that reduces your taxable income. For 2025, the amounts are:

Additional amounts for taxpayers who are 65 or older or blind:

Single/HoH: additional $1,950

Married: additional $1,550 per qualifying spouse

Most taxpayers (roughly 87%) take the standard deduction. The 2017 Tax Cuts and Jobs Act nearly doubled the standard deduction, making itemizing less beneficial for many filers.

When Itemizing Makes Sense

Itemizing requires reporting specific deductible expenses on Schedule A. The major categories are:

1. State and Local Taxes (SALT)

State income tax or sales tax

Local income tax

Property taxes

Combined cap: $10,000 ($5,000 if married filing separately)

This cap is the primary reason many homeowners in high-tax states no longer benefit from itemizing.

2. Mortgage Interest

Interest on up to $750,000 of mortgage debt ($375,000 if married filing separately)

Interest on home equity loans if used for home improvements

Mortgage points paid at closing

3. Charitable Contributions

Cash donations: up to 60% of AGI

Non-cash donations: fair market value, up to 30% of AGI

Qualified charitable distributions from IRAs (age 70.5+)

4. Medical Expenses

Only the amount exceeding 7.5% of your AGI

Includes health insurance premiums (if not pre-tax), prescriptions, dental, vision, long-term care

5. Casualty and Theft Losses

Only from federally declared disasters

Subject to $100 per-event floor and 10% of AGI threshold

The Break-Even Calculation

The decision is straightforward mathematics. Add up all your itemizable expenses. If the total exceeds your standard deduction, itemize. If not, take the standard deduction.

Example - Single filer:

State/local taxes: $8,000

Mortgage interest: $6,500

Charitable donations: $2,000

Medical expenses above 7.5% AGI: $0

Total: $16,500

Since $16,500 exceeds the $15,000 standard deduction, this taxpayer should itemize and save tax on an additional $1,500 of deductions.

Example - Married filing jointly:

State/local taxes: $10,000 (capped)

Mortgage interest: $12,000

Charitable donations: $3,000

Total: $25,000

Since $25,000 is less than the $30,000 standard deduction, this couple should take the standard deduction, saving tax on an additional $5,000.

Strategies to Optimize Your Deduction

Bunching Strategy

If your itemized deductions are close to the standard deduction, consider "bunching" deductions into alternating years:

Year 1: Make two years of charitable donations, prepay property taxes, bunch medical procedures. Itemize.

Year 2: Minimal deductions. Take the standard deduction.

This alternating approach can save you thousands over a two-year period compared to splitting deductions evenly.

Donor-Advised Fund

Contribute a large lump sum to a donor-advised fund in a bunching year. You get the full deduction immediately but can distribute to charities over multiple years.

Above-the-Line Deductions

These reduce your AGI regardless of whether you itemize:

Student loan interest (up to $2,500)

Traditional IRA contributions

Self-employment tax deduction

Health insurance premiums (self-employed)

HSA contributions

Always claim these in addition to whichever deduction method you choose.

Special Situations

Married Filing Separately

If one spouse itemizes, the other must also itemize (cannot take the standard deduction). This sometimes creates unfavorable results.

Non-Resident Aliens

Non-resident aliens generally cannot take the standard deduction and must itemize.

Dependents

If you can be claimed as a dependent, your standard deduction may be limited to the greater of $1,300 or your earned income plus $450.

Use AI to Decide

Tax software like Taxation.ai automatically calculates both methods and recommends the option that gives you the lowest tax bill. The platform analyzes your complete financial picture, including deductions you might not know about, to ensure you never leave money on the table.