Standard Deduction vs. Itemizing
When filing your individual income tax return, one of the biggest decisions is whether to claim the standard deduction or itemize. The One Big Beautiful Bill Act (OBBBA) has changed the landscape for 2025, making itemizing more attractive for many taxpayers. If your state and local tax (SALT) payments exceeded $10,000 last year, you may save more by itemizing—even if the standard deduction has been better in recent years.
How the Standard Deduction Has Changed
The OBBBA permanently extended the nearly doubled standard deduction introduced by the Tax Cuts and Jobs Act (TCJA). For 2025, the amounts are:
- $15,750 for single and separate filers
- $23,625 for heads of household
- $31,500 for married couples filing jointly
These amounts will continue to adjust annually for inflation. Because of these higher deductions and the TCJA’s reduction of many itemized deductions, most taxpayers have found the standard deduction more beneficial in recent years. But with the SALT changes, that may no longer be the case.
The New SALT Deduction Limit
SALT expenses include property taxes (on homes, vehicles, boats) and either income tax or sales tax. Historically, these were fully deductible if you itemized. The TCJA capped the deduction at $10,000 ($5,000 for married filing separately) from 2018 through 2025.
Starting in 2025, the OBBBA quadruples the cap to $40,000 ($20,000 for married filing separately), with 1% increases each year until 2029. The $10,000 cap is scheduled to return in 2030.
For example, a married couple in the 32% tax bracket with $40,000 in SALT expenses could save an additional $9,600 in taxes compared to the old cap.
Limits for Higher-Income Taxpayers
The higher SALT deduction phases out for taxpayers with modified adjusted gross income (MAGI) above $500,000 ($250,000 for separate filers). The deduction is reduced by 30% of the excess over the threshold. At $600,000 MAGI, the deduction reverts to the old $10,000 cap.
Even with reductions, taxpayers above the threshold may still see significant savings compared to the previous cap.
Other Itemized Deductions to Consider
If your SALT deduction alone doesn’t exceed the standard deduction, you may still benefit by combining it with other itemized deductions, such as:
- Medical expenses exceeding 7.5% of AGI
- Mortgage interest on acquisition debt up to $750,000
- Charitable donations (cash gifts deductible up to 60% of AGI in 2025)
- Casualty and theft losses from federally declared disasters
Should You Return to Itemizing?
If you’ve relied on the standard deduction in recent years, 2025 may be the time to reconsider. The expanded SALT deduction could tip the balance in favor of itemizing, potentially saving you thousands. For those already itemizing, the new limits could mean even greater tax savings.
Professional guidance can help you evaluate your SALT expenses, MAGI, filing status, and other deductions to ensure you maximize your tax benefits