Standard deduction vs. Itemized: Which one should you pick?

Deciding how to claim deductions is one of the most important steps in filing your taxes—and often the most stressful. In fact, tax anxiety affects 3 in 4 business owners (77%). Whether you're a small business owner or a W-2 employee, the goal is the same: Reduce your taxable income as much as possible to keep more of your hard-earned money.

In this guide, we’ll break down the differences between the standard deduction and itemizing, providing the updated figures you need for filing your taxes in 2026.

Jump to:

• What are standard deductions?
• What are itemized deductions?
• 5 Common itemized deductions
• Miscellaneous and lesser-known itemized deductions
• Pros and cons of standard deduction vs itemized
• Example of standard deduction vs itemized
• Tips for preparing to itemize
• State tax considerations
• How to use your benchmark to help you choose
• Finding peace of mind at tax time

What are standard deductions?

The standard deduction lowers your income by a fixed amount determined by the IRS. It is the easy route because it requires no proof of spending. However, the amount varies significantly based on your filing status.

For the 2025 tax year (the taxes you will file in 2026), the amounts have increased to account for inflation:

If you are age 65 or older or legally blind, you are entitled to two distinct benefits for the 2025 tax year:

The standard Add-on is the traditional additional deduction. For 2025, it is $2,000 for single or head of household filers and $1,600 per person for married filers. Note: This is only available if you take the standard deduction.

Under the new OBBBA law, individuals age 65+ can claim an additional $6,000 deduction ($12,000 for qualifying married couples).

• The best part: Unlike the standard add-on, this $6,000 bonus can be claimed even if you itemize.
• Income limit: This bonus begins to phase out if your Modified Adjusted Gross Income (MAGI) exceeds $75,000 (single) or $150,000 (married filing jointly).

What are itemized deductions?

For your itemized deductions, you’ll need to keep track of receipts for allowed itemized expenses and add them up to see if the amount is higher than the standard deduction. You’ll also have to report the amounts on Schedule A for your Form 1040. The amount of qualified expenses for itemized deductions will vary by year. 

If you decide to itemize your deductions or want to calculate how much the deduction would be, you'll need to know the key types of expenses to look at.

5 Common itemized deductions

Itemizing your deductions can significantly reduce your taxable income if your total qualifying expenses exceed the standard deduction. While it requires tracking receipts and filling out Schedule A, the potential tax savings can make it worthwhile.

High medical expenses, mortgage interest, charitable contributions, and state and local taxes are some of the most common deductions. If these apply, itemizing could save you more than the standard deduction. Just be mindful of qualification thresholds and deduction limits to ensure you’re making the most of this option.

Let’s explore some examples.

1. Medical expenses 

You can deduct a percentage of unreimbursed medical and dental expenses you pay. For example, doctor payments, hospital care, and prescriptions. To qualify, these expenses must be out of pocket, meaning you did not receive reimbursement.

You can only deduct medical and dental expenses that are greater than 7.5% of your adjusted gross income (AGI). If your total expenses are below the 7.5% floor, they are not deductible. For example, if your AGI is $75,000 and you have $7,500 in medical expenses, you can only deduct $1,875. 

2. Mortgage interest 

You can deduct the interest you pay on a home loan. However, there are mortgage interest limits. The deduction is only for the first $750,000 in mortgage debt for your first or second home. Or $375,000 for married couples filing separately.

3. Charitable contributions 

You can also include contributions to charities in your itemized deductions. You can only deduct up to 60% of your AGI for cash contributions. The limit is lower for other types of charitable contributions, such as property. 

Donations can include those for nonprofits and religious organizations and can be in the form of cash, property, or out-of-pocket expenses. 

Contributions of $250 or more require a letter from the charity for tax documentation purposes. 

4. State and Local Tax (SALT) Deduction Policies  

You can also elect to deduct either state and local income taxes or state and local sales taxes, but not both. Most taxpayers choose to deduct income taxes because the dollar amount is larger. Then, you can also deduct property and real estate taxes. 

Your deduction of state and local taxes and property taxes is limited to $40,000, or $20,000 if married filing separately.  

Note, you can also itemize other expenses, such as casualty and theft losses from a federally declared disaster or gambling losses. 

5. Casualty and disaster losses  

If you experience damage or loss due to a federally declared disaster, you may be eligible for a deduction. To qualify, the loss must not be covered by insurance or other reimbursements and must exceed 10% of your AGI. This deduction applies only to losses in federally declared disaster areas and requires thorough documentation of the damage and costs.

Miscellaneous and lesser-known itemized deductions

Beyond the common categories, several other expenses can be itemized to help you cross the threshold of the standard deduction:

• State sales tax: If you live in a state with no income tax (like Florida or Texas), you can deduct state sales tax instead.
• Gambling losses: You can deduct losses up to the amount of your gambling winnings.
• Home office deduction: If you are self-employed and use a portion of your home exclusively for business, you can deduct a portion of your utilities, rent, insurance, and other expenses.
• Educator expenses: Teachers can deduct up to $300 for classroom supplies ($600 if both spouses are eligible teachers).
• Qualified charitable distributions (QCDs): If you are 70½ or older, you can move up to $108,000 directly from an IRA to a charity. This satisfies your Required Minimum Distribution (RMD) without adding to your taxable income.

Pros and cons of standard deduction vs itemized

Every taxpayer's situation is unique, and the right choice often depends on balancing financial savings with the time required for documentation. The standard deduction offers a guaranteed, hands-off reduction in taxable income. Itemizing provides a customized approach that may lead to much deeper savings if you have significant life expenses.

Standard deduction 

The standard deduction is a fixed amount set by the IRS that reduces your taxable income without requiring proof of expenses. It’s simple, requires no extra paperwork, and is often the default choice for taxpayers without significant itemized expenses. 

The amount varies based on your filing status and offers additional deductions for those who are 65 or older or blind. 

Convenience: The IRS sets the amount, which adjusts annually.

Additional benefits: If you're 65 or older or blind, you get an extra $2,000 for 2025.

Limitations: Married filing separately? Both spouses must either itemize or take the standard deduction. If someone claims you as a dependent, your standard deduction is smaller.

Here are common scenarios where it’s optimal:

Low out-of-pocket expenses: If you don’t have substantial medical bills, mortgage interest, or charitable donations, the standard deduction is likely more advantageous.

Simple tax situations: Taxpayers with straightforward finances, such as renters or those without dependents, usually benefit from the simplicity of the standard deduction.

Dependents with limited income: If someone claims you as a dependent and your income is low, you’re generally better off taking the standard deduction.

Time constraints: If gathering receipts and calculating itemized deductions seems daunting or time-consuming, the standard deduction saves effort while still reducing taxable income.

Itemized deductions 

Itemized deductions allow you to deduct specific expenses, such as medical bills, mortgage interest, and charitable donations, but require detailed record-keeping and filing Schedule A. 

This option is beneficial for taxpayers with deductible expenses that exceed the standard deduction, although it requires more effort and is subject to certain caps and limitations.

Higher potential deduction: Itemizing might save more if you:

• Have high medical expenses.
• Pay mortgage interest.
• Claim other eligible expenses.

Limitations: Requires more effort to track expenses and follow the rules. Some limits apply, like caps on mortgage interest.

Example of standard deduction vs itemized

Choosing between the standard deduction and itemizing comes down to the amount. For example, say you’re a single taxpayer with an adjusted gross income of $40,000. You pay a large amount in mortgage interest and property taxes, and track your expenses to find that you spent a lot in unreimbursed medical costs. 

You add up your possible itemized deductions, and the total is $16,500. However, the standard deduction for the 2023 tax year is $13,850. Since the itemized deduction is higher, you should itemize. 

In that example, the best choice was itemized deductions. The standard deduction is often the best choice for taxpayers with few significant deductible expenses. 

Tips for preparing to itemize 

Proper preparation makes itemizing your deductions easier and ensures you don’t miss out on potential savings. Here are some tips to streamline the process:

• Year-round recordkeeping: Maintain a dedicated folder or digital archive for all deductible expenses throughout the year. Regularly review and categorize expenses like medical bills, charitable contributions, and property taxes to avoid last-minute scrambles.
• Gathering documentation: Collect essential tax forms, such as Form 1098 for mortgage interest and receipts for charitable donations, medical expenses, and other deductible items.
• Use tools and apps: Tax software like TurboTax and QuickBooks can help you track expenses and estimate deductions. Apps like Expensify or Evernote make it easy to digitize and categorize receipts on the go, keeping everything accessible during tax season.

State tax considerations 

State tax rules can significantly impact your decision to itemize, as deductions and credits vary by location.

• Why state tax rules matter: Some states do not allow the standard deduction, requiring you to itemize. Others have unique rules or offer additional deductions that can increase your overall savings.
• States where itemizing saves more: In states with high property taxes, such as New York or California, itemizing can lead to greater savings due to the ability to deduct these costs. States with no income tax, like Florida or Texas, make the state sales tax deduction particularly valuable.

Federal vs. state deductions: While federal rules often guide your decision, state tax laws may differ. Some deductions allowed at the federal level, like SALT, might have limits or exclusions at the state level. Always review both sets of rules to maximize your benefits.

How to use your benchmark to help you choose

Deciding between these two paths is essentially a break-even analysis. To make the right choice, treat the standard deduction for your filing status as your benchmark. If your total qualifying expenses are higher than that benchmark, itemizing will lower your tax bill. If they are lower, the standard deduction is your best friend.

For example, a single filer has a benchmark of $15,750. If their combined mortgage interest, property taxes, and charitable gifts total $16,500, they should itemize to beat the standard amount by $750. Conversely, if those costs only total $12,000, the standard deduction provides an extra $3,750 in tax-free income without any extra paperwork.

You’ll likely save more with the standard deduction if:

• You are a renter: Without mortgage interest or property taxes, it is very difficult to exceed the standard deduction threshold.
• Your health was good: If you had a few out-of-pocket medical bills, you likely won't hit the 7.5% AGI floor required to deduct them.
• You value simplicity: If your potential itemized savings are only a few dollars more than the standard deduction, you might prefer the faster, receipt-free filing process.

You’ll likely save more by itemizing if:

• You are a homeowner: Large interest payments on a mortgage and high local property taxes are the most common reasons to itemize.
• You had a major medical year: Significant surgeries, dental work, or unreimbursed treatments can quickly add up.
• You are highly philanthropic: Large cash donations or property gifts to nonprofits can push your total deductions well above the standard limit.

Finding peace of mind at tax time

Tax preparation doesn't have to be a source of stress. Whether you choose the simplicity of the standard deduction or the potential savings of itemizing, the key is organization.

Using accounting software like QuickBooks Solopreneur can help you track business expenses and personal deductions year-round, so when 2026 rolls around, you aren't digging through shoeboxes for receipts.

Understanding these limits and staying organized can help you choose the method that keeps the most money in your pocket.