Should you itemize your tax deductions for 2025?
In mid-2025, Congress passed a major tax and budget bill that changed the rules for itemized tax deductions. State and local tax (SALT) deductions are now significantly higher, charitable deductions now have new limits starting in 2026 and the mortgage interest deduction loan cap was made permanent.
What should taxpayers know about these new adjustments to itemized deductions under Schedule A (Form 1040)? Keep reading for details on what the new deduction rules look like, plus insight into whether you should consider itemizing on your own taxes this year.
Itemized deductions vs. standard deduction: Which should you choose?
The average taxpayer will likely be best served by choosing the standard deduction, as that will typically allow for a greater reduction in taxable income. However, if you give significant amounts of money to charity, face high SALT taxes and/or have high interest expenses (like mortgage interest), itemizing on Schedule A may lower your tax burden more than claiming the standard deduction would.
- As a baseline, for the 2025 tax year, the standard deduction is $15,750 for single filers and $31,500 for married couples filing jointly.
- If your deductible expenses exceed your applicable threshold, you’re often better off choosing to itemize your deductions rather than claiming the standard deduction.
- However, these rules can be complicated, so if you’re considering itemizing, you’re typically best served by consulting with your tax advisor to determine which choice makes the most sense for your specific situation.
How have itemized deduction rules changed in 2025?
In July, the One Big Beautiful Bill (OBBB) Act adjusted the rules for itemized deductions under Schedule A. Perhaps the most significant change is a fourfold increase in the SALT tax deduction cap. However, new limits on the amount of taxable income you can reduce by charitable giving will also affect some taxpayers. Key details include:
- The SALT cap has increased from $10,000 to $40,000. As a result, more people will likely benefit from itemizing than in previous years. However, this shift lasts only through the end of 2029, at which point the cap reverts back to $10,000.
- Mortgage interest expenses remain deductible. The $750,000 loan cap, which had been slated to sunset, has instead been made permanent.
- Rules for deducting charitable contributions will soon change. Beginning in 2026, if you itemize charitable contributions, you must first exceed 0.5% of your AGI before your contributions become deductible. For example, if you make $200,000 a year, your first $1,000 of charitable giving is not deductible, because you haven’t yet crossed the 0.5% threshold.
- If you’re in the top tax bracket, you should note that charitable deductions can only reduce your taxable income by a maximum of 35%, down from 37% in previous years.
- Miscellaneous 2% itemized deductions, which were temporarily suspended with the 2018 Tax Cuts and Jobs Act (TCJA) tax law change, are now permanently repealed and disallowed.
- And finally, there is now an overall 2/37 haircut on income above the 37% bracket threshold, which means that taxpayers in the top marginal bracket will see a 2% reduction in the benefit of itemized deductions.
Additionally, the qualified business income deduction (or Section 199A) is now permanent, rather than expiring at the end of the year. This deduction is available regardless of whether you choose to take the standard deduction or itemize your deductions on Schedule A.
As a taxpayer, what are your next steps here?
If you plan on itemizing your deductions or believe you would likely benefit from doing so, there are steps you can take now to strengthen your tax position. Thoughtful strategies around SALT and charitable contributions can help you maximize your deductions over the next several years.
For starters, if you expect to pay less than $40,000 in SALT taxes in 2025, consider prepaying your 2026 SALT taxes. Doing this will allow you to claim more of this year’s $40,000 deduction by bringing next year’s costs into the current tax year.
With the lower 35% cap on charitable deductions set to arrive in 2026, decide if it makes sense to donate more to charity this year to take advantage of the current 37% cap.
This strategy may also be useful if you only itemize because of your charitable giving and would otherwise take the standard deduction. In that case, you may be well served by bunching three to five years’ worth of giving into one year to max out your deduction, and then taking the standard deduction for several years after that.
In each of these cases, consult your tax advisor for guidance on what’s possible and how to execute. This will help you navigate the complexities of tax law, avoid making costly mistakes and strengthen your financial outcomes.
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