For most taxpayers, deciding between the standard deduction and itemizing is a quick mental calculation you do once and then forget. But if your household includes a large mortgage, meaningful state tax liability, significant charitable giving, or income from a business or equity compensation, the math is rarely that tidy—and 2026 makes it even less so.
The passage of the One Big Beautiful Bill Act (OBBBA) has reshaped the 2026 deduction landscape. Most notably, the OBBBA temporarily raised the SALT deduction cap to $40,400 for tax year 2026, a significant change that impacts many high earners in high-tax states.
This guide explains how the standard deduction and itemized deductions work, what you can itemize, and how the 2026 changes affect your decision. Plus, a few strategies to consider if your deduction decision is more complex.
Every taxpayer reduces their taxable income using one of two methods: the standard deduction or itemized deductions. You cannot use both, and choosing correctly can change how much you owe at the end of the year.
The standard deduction is a flat amount the IRS sets each year based on your filing status and adjusted for inflation. There are no documentation or calculation requirements, just a straightforward reduction to your taxable income. According to the IRS, most taxpayers now qualify for the standard deduction.
Itemized deductions, by contrast, require you to total specific deductible expenses, using Schedule A of Form 1040, and claim that sum instead. Itemizing only makes sense when your qualifying expenses exceed your standard deduction amount.
Some taxpayers don’t have a choice. According to the IRS, individuals who are married filing separately with a spouse who itemizes, nonresident or dual-status aliens, and those filing a short-year return due to a change in accounting period are required to itemize.
The conventional rule is straightforward: if your itemizable expenses exceed your standard deduction, itemize. If not, take the standard deduction. The IRS Interactive Tax Assistant tool can help you compare itemizing vs. taking the standard deduction.
For a household with a modest mortgage, no state income tax, and light charitable giving, the standard deduction is usually the best option.
But high earners rarely fit that profile. A larger mortgage means more deductible interest. Higher state income and property taxes push against the SALT cap. Meaningful charitable giving can tip the scale on its own. And if you’re also managing business income, equity compensation, or investment gains, your itemizable expenses interact with other parts of your return in ways the simple rule doesn’t account for.
Your deduction strategy should align with your income timing, giving plans, and multi-year tax picture. This makes the decision a continual planning exercise, not a one-time calculation.
If your itemized deductions have a real chance of exceeding the standard deduction, it helps to know exactly what qualifies. The most common categories include:
Mortgage interest: Interest paid on qualifying home loans, generally on loan balances up to $750,000 (or $1 million for loans originated before December 16, 2017). If you carry a mortgage, this is often your largest single itemized deduction available to you, and one worth reviewing each year as your loan balance changes.
State and local taxes (SALT): Income, sales, real estate, and personal property taxes, subject to the SALT deduction cap. Under the One Big Beautiful Bill Act (OBBBA), that cap has temporarily increased from $10,000 to $40,400 for tax year 2026. This change especially benefits high earners in high-tax states who previously couldn't itemize under the lower limit. The cap is scheduled to phase back down starting in 2030 and includes an income-based phaseout beginning at $505,000.
Charitable contributions: Cash and non-cash gifts to qualifying organizations, generally deductible up to 60% of your adjusted gross income for cash donations and 30% for appreciated property. For taxpayers in the 37% tax bracket, the deductible savings cap is 35 cents per one dollar donated. Proper documentation, including written acknowledgment from the charity for gifts of $250 or more, is required to support your claim. OBBBA requires that contributions exceed 0.05% of your AGI. Only amounts above the 0.05% floor are deductible.
Medical and dental expenses: Out-of-pocket costs for diagnosis, treatment, and preventive care are deductible if they exceed 7.5% of your adjusted gross income. For most households, this threshold is difficult to clear in a typical year, but major medical events can make this deduction possible.
Other qualifying costs: Certain casualty and theft losses in federally declared disaster areas, gambling losses (up to the amount of reported winnings), and select miscellaneous itemized deductions may also apply depending on your circumstances.
Not sure whether itemizing pays off for your household? A focused review of your income, giving, and deductible expenses can reveal the answer.
What Is Required to Claim Itemized Deductions?
Choosing to itemize is only half the equation. To support your deduction claims and withstand IRS scrutiny, get organized before you file.
Track your deductible expenses throughout the year. Rather than reconstructing your spending at tax time, keep a running record of costs that may qualify, including charitable contributions, medical expenses, mortgage interest, and state and local taxes paid. Small amounts add up, and gaps in your records can cost you.
Maintain supporting documentation for every deduction you claim. At a minimum, that includes:
Receipts for out-of-pocket expenses, including medical and dental costs
Bank and credit card statements confirming payment dates and amounts
Medical expense records detailing the procedure and cost of qualifying treatments
Charitable giving acknowledgment letters for any cash or non-cash contribution of $250 or more
Tax documentation related to mortgage interest (Form 1098), real estate taxes paid, and state income taxes withheld or paid
The IRS requires you to substantiate itemized deductions. If your records are incomplete, the IRS may not allow deductions you're entitled to. Working with a tax advisor throughout the year makes it easier to claim every qualifying expense and make sure your documents meet the required standard.
If your deduction decision is close, or if you consistently fall just under the standard deduction threshold, a few strategies can shift the balance in your favor.
Charitable bunching. Rather than giving the same amount every year, consolidate two or more years of planned giving into a single tax year. This can push your itemized total above the standard deduction in the bunching year, while you take the standard deduction in the years between. A donor-advised fund is often used to facilitate this without changing your actual giving timeline to charities.
Timing deductible payments. Shifting the timing of property tax payments, deductible medical procedures, or other qualifying expenses into a single calendar year can concentrate deductions where they’ll have the greatest impact.
Coordinating with business income and equity compensation. If you own a business or receive equity compensation, don’t evaluate your itemized deduction strategy in isolation. The timing of a bonus, a stock option exercise, or a business distribution can shift your income into a different bracket, changing the value of deductions taken in that same year.
Our year-end tax planning resources go into more detail on structuring these decisions before December 31, when most of these options are still available to you.
If you or your spouse are 65 or older, you may be eligible for a new $6,000 bonus deduction per qualifying person introduced under the OBBBA. This temporary deduction is available for tax years 2025 through 2028. It works as a separate bonus deduction you can add to the standard deduction or your itemized deductions, making it accessible regardless of which method you use.
You must have a modified adjusted gross income (MAGI) up to $75,000 for single filers and $150,000 for married couples filing jointly, with a phaseout applying above those thresholds.
How Your Decision Fits Your Broader Financial Plan
Itemizing or taking the standard deduction isn’t a decision that lives in isolation on your tax return. It connects to how you invest, how you give, and how you plan to transfer wealth.
If you’re managing a diversified investment portfolio, the timing of capital gains or losses can influence your income in a given year, which in turn affects whether itemizing makes sense. If philanthropy is part of your long-term goals, your charitable and philanthropic planning strategy should be built with deduction bunching and multi-year giving in mind, not decided each April separately. And if estate planning is part of your picture, coordinating deductible gifts and payments with your broader wealth transfer goals can improve outcomes across generations, not just within a single tax year.
That is why the standard deduction versus itemizing decision works best as an ongoing conversation with your tax and financial advisors, not a box to check once a year.
Choosing between the standard deduction and itemizing comes down to comparing your qualifying expenses against your filing status’s standard amount. But for high earners, families, and entrepreneurs, that comparison is shaped by recent OBBBA changes, and the timing of income and deductions across multiple years.
Rather than assume this year looks like last year, it’s worth revisiting the calculation with current guidance and a clear view of your full financial picture. Our individual and family tax services are built around exactly this kind of proactive, coordinated planning.
Contact an LTax team member, and let’s talk through deductions and what the 2026 tax changes mean for your tax strategy.
It depends on whether your total qualifying itemized expenses, including mortgage interest, SALT payments, charitable gifts, and eligible medical costs exceed your standard deduction for your filing status. High earners with significant deductible expenses are more likely to benefit from itemizing, but this should be recalculated each year.
The 2026 standard deduction figures were pending official IRS confirmation at the time of publication. The most recently confirmed amounts were $15,750 for single filers, $31,500 for married couples filing jointly, and $23,625 for heads of household. Confirm current 2026 amounts with a tax professional before filing.
Common itemized deductions include mortgage interest, state and local taxes (subject to the SALT cap), charitable contributions, medical and dental expenses exceeding 7.5% of adjusted gross income, and certain casualty, theft, or gambling losses.
Charitable bunching is a strategy that involves consolidating multiple years of planned charitable giving into a single tax year to exceed the standard deduction threshold. It often involves using a donor-advised fund. Consider it if your annual giving alone doesn't push you over the standard deduction but multiple years combined would.