Don’t worry – the Internal Revenue Service (IRS) doesn’t want to tax every last cent you earn. That’s where deductions come in. In fact, the agency offers a standard tax deduction — a gift! — to all taxpayers based on their filing status.
Standard deduction rates
Here are the standard deduction rates for the 2024 and 2025 tax seasons:
| Tax filing status | Standard deduction 2024 | Standard deduction 2025 |
|---|---|---|
| Single | $14,600 | $15,750 |
| Head of Household | $21,900 | $23,625 |
| Married filing jointly and surviving spouse | $29,200 | $31,500 |
| Married filing separately | $14,600 | $15,750 |
However, depending on your finances, itemizing tax deductions may lower your tax burden even further.
Understanding itemized deductions
Written into the tax code are allowances for all kinds of deductible expenses. When you itemize deductions on your federal income tax return (the famous Form 1040), you attempt to claim legal deductions that add up to more than the standard deduction. This is done in hopes that you get a bigger refund or have a smaller tax bill. If you’re unsure which method would be most beneficial for you, check out Should I Itemize or Take the Standard Deduction?
Before itemizing your deductions, just remember that it requires careful financial record-keeping and a close reading of the tax rules. However, going this route can pay off come the April tax deadline.
Most common itemized deductions
Mortgage interest
This is a great benefit for homeowners whose monthly mortgage checks include huge chunks of interest. You can deduct 100% of the mortgage interest you paid by itemizing deductions. For more information, check out our article on the interest expense deduction.
State and local tax deduction (SALT)
The SALT deduction lets you write off state and local income, sales, and property taxes you’ve already paid, but there are limits on how much you can deduct.
Starting with the 2018 tax year, this deduction was capped at $10,000 ($5,000 if married filing separately). For tax year 2025 and beyond, the One Big Beautiful Bill Act (OBBBA) sets a new law that increases the cap to $40,000 ($20,000 if married filing separately) for most taxpayers. If your modified adjusted gross income (MAGI) exceeds $500,000 ($250,000 for married filing separately), the limit begins to phase down, but never drops below $10,000. The $40,000 limit will be adjusted for inflation after 2025, but unless Congress acts, the cap will revert back to $10,000 in 2030.
As before, you can choose to deduct sales tax instead of income tax if you live in one of the states with no income tax.
Charitable gifts and donations
To reward charitable giving, the IRS lets taxpayers deduct the cash value of donations given to tax-exempt charities. The charitable giving deduction is generally capped at 60% of your adjusted gross income (AGI).
The OBBBA also made some changes to the charitable donation deduction. Starting in 2026, you can deduct charitable donations up to $1,000 (for single filers) or $2,000 (for joint filers) even if you take the standard deduction. This is a new federal above-the-line deduction, which means you don’t need to itemize to claim it.
The new law also sets a new floor for itemized deductions for charitable contributions. Beginning in 2026, you can only deduct charitable donations that exceed 0.5% of your AGI if you itemize. For tax year 2025, the law remains the same as before, so nothing will change until next year.
Medical and dental expenses
The IRS recognizes the high cost of health care and allows a partial deduction of out-of-pocket medical expenses (not health insurance premiums). The deduction covers the portion of medical expenses that exceed 7.5% of your income.
Additional deductible expenses
You can also deduct other costs, like theft and casualty losses, non-business bad debts, and gambling losses.
In some instances, you can deduct non-reimbursed job expenses. To do so, you must fall into one of the following categories: Armed Forces Reservists, qualified performing artists, fee-basis state or local government officials, or employees with impairment-related work expenses.
Limits to itemized deductions
The generosity of the IRS does have its limits, however. The tax code applies floors, ceilings, and phase-outs for certain itemized deductions:
- Floors set a minimum amount at which you can start deducting certain expenses, such as medical expenses over 7.5% of AGI. That 7.5% is the floor.
- Ceilings impose a limit on specific categories of itemized deductions, like the limit on charitable deductions to 60% of AGI.
Additionally, you can only deduct 50% of business-related meals and entertainment costs. For a brief time during the pandemic, certain restaurant meals were 100% deductible, but that is no longer the case for tax years 2024 and 2025.
If you earn or lose money gambling, gambling losses can’t exceed your gambling winnings.
The bottom line
Whether you choose to itemize your deductions or take the standard deduction, it’s important to understand how each option can impact your tax return. While the standard deduction is simple and generous, itemizing can provide additional savings if your eligible expenses exceed the standard amount. Just be sure to keep good records and stay on top of tax rules to maximize your potential deductions!
Not sure which path is best for you? TaxAct® can help you decide whether to itemize or take the standard deduction based on your situation.
This article is for informational purposes only and not legal or financial advice.
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