Itemized Deductions vs. the Standard Deduction

How the choice works

Each year you deduct the larger of the standard deduction or your itemized deductions (Schedule A). You don’t have to choose the same way every year.

People 65 and older or blind get an additional standard deduction. Separately, from 2025 through 2028, people 65 and older can take a new deduction of up to $6,000 each, whether or not they itemize. It phases out above $75,000 of income ($150,000 joint).

The main itemized deductions

State and local taxes (SALT)

You can deduct state income tax (or sales tax, if larger) plus property taxes, up to the SALT cap. The 2025 tax law raised the cap:

• 2025: $40,000 ($20,000 married filing separately)
• 2026: $40,400, rising 1% a year through 2029
• For income above $505,000 (2026), the cap is reduced by 30% of the excess, but not below $10,000.
• In 2030 the cap is scheduled to return to $10,000.

Mortgage interest

Interest on up to $750,000 of debt used to buy, build, or improve your main home and one second home is deductible. The limit is $1 million for loans taken out before December 16, 2017. Home equity interest counts only if the loan was used to improve the home. Starting in 2026, mortgage insurance premiums are deductible again.

Charitable contributions

Gifts to qualified charities are deductible, with records: a bank record or receipt for any cash gift, and a written acknowledgment from the charity for gifts of $250 or more. Non-cash gifts over $500 require Form 8283, and an appraisal is needed above $5,000. Two changes start in 2026:

• If you itemize, only the charitable gifts above 0.5% of your adjusted gross income are deductible.
• If you don’t itemize, you can deduct up to $1,000 of cash gifts ($2,000 married filing jointly). Gifts to donor-advised funds don’t qualify.

Medical and dental expenses

Unreimbursed medical costs are deductible to the extent they exceed 7.5% of your adjusted gross income. This deduction often matters in a year with a major surgery or long-term care costs.

Other itemized deductions

• Casualty and theft losses from declared disasters
• Gambling losses, up to gambling winnings. Starting in 2026, only 90% of losses are deductible.
• Investment interest, up to net investment income
• Unreimbursed educator expenses, from 2026 (teachers who don’t itemize still get the $300 above-the-line deduction)

Unreimbursed employee expenses, tax preparation fees, and investment advisory fees are no longer deductible.

High earners

From 2026, taxpayers in the 37% bracket receive a reduced benefit from itemized deductions. In effect, each dollar of itemized deductions saves no more than 35 cents.

Bunching

If your itemized deductions are close to the standard deduction, you can sometimes come out ahead by “bunching”: making two years of charitable gifts in one year (for example, through a donor-advised fund) and taking the standard deduction the next.

Colorado

Colorado starts from federal taxable income, so your federal choice flows into the state return. Colorado does add back part of the itemized or standard deduction for higher-income taxpayers; we handle that on the state return.

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