Understanding the Standard Deduction vs. Itemizing
Navigating your tax return can be confusing, especially when it comes to choosing between the standard deduction and itemizing and understanding how your income is taxed. Here’s a clear guide to help you make sense of these important concepts.
Standard Deduction vs. Itemizing: What’s the Difference?
When you file your federal taxes, you have two main options to reduce your taxable income: the standard deduction or itemized deductions. You can only choose one each year.
- Standard Deduction: This is a fixed dollar amount that most taxpayers can subtract from their income, no questions asked. For tax year 2025, the standard deduction is $15,000 for single filers and $30,000 for married couples filing jointly. It’s adjusted annually for inflation and is higher for those over 65 or blind. No receipts are needed.
- Itemized Deductions: Instead of taking the standard deduction, you can add up specific eligible expenses, such as mortgage interest, state and local taxes, medical expenses, and charitable donations. If the total of these expenses is greater than the standard deduction for your filing status, you might benefit from itemizing. Receipts are needed.
Why Most People Take the Standard Deduction
Nearly 90% of taxpayers now claim the standard deduction. It’s simpler, requires no record-keeping, and, thanks to recent increases, often results in a larger deduction unless you have significant deductible expenses. For married couples, the $30,000 standard deduction for 2025 is a high bar, so itemizing only makes sense if your total eligible expenses exceed this amount.
An Example of When Taking the Standard Deduction Is Better
Let’s look at a scenario for a married couple, Sarah and Mike, filing jointly in 2025.
Sarah and Mike are reviewing their potential deductions for the year. The standard deduction for married couples filing jointly in 2025 is $30,000. They gather their records and calculate their itemized deductions:
- Mortgage interest: $12,000
- State and local taxes (SALT): $8,000 (capped at $10,000)
- Charitable donations: $5,000
- Medical expenses: $2,000 (but only the amount exceeding 7.5% of their AGI is deductible, which in their case is $0)
Total itemized deductions: $12,000 + $8,000 + $5,000 = $25,000
In this case, their itemized deductions total $25,000, which is $5,000 less than the standard deduction. By choosing the standard deduction, Sarah and Mike reduce their taxable income by a larger amount and avoid the extra paperwork of itemizing.
Unless your itemized deductions add up to more than the standard deduction, taking the standard deduction is usually the better option. For Sarah and Mike, it means more tax savings and a simpler tax return.
Disclaimer: The information provided on this website is for general informational and educational purposes only and does not constitute tax, legal, or accounting advice. I am not a licensed tax advisor and nothing on this site should be relied upon as tax advice for your specific situation. Tax laws are complex, subject to change, and can vary based on individual circumstances. You are strongly encouraged to consult with a qualified tax professional or advisor before making any decisions or taking any actions based on the information provided here. By using this website, you acknowledge and agree that I am not responsible for any tax consequences that may arise from your use of the information contained herein.