When you file your tax return, one decision can have a bigger impact than you might expect.
That decision is whether to take the standard deduction or itemize your deductions.
Many people choose one option without giving it much thought, but the choice can significantly affect how much tax you pay.
The 2026 tax year makes this decision even more important. Several tax rules introduced under the Tax Cuts and Jobs Act are scheduled to change, and that could shift the balance for millions of taxpayers. What worked for you in recent years may no longer be the best option in 2026.
Tax deductions reduce your taxable income. The lower your taxable income, the less tax you owe.
The standard deduction offers a flat amount that anyone who qualifies can claim.
Itemized deductions allow you to list specific expenses instead.
Each approach has advantages, but only one will save you the most money for a given year.
Many taxpayers automatically take the standard deduction because it feels easier. Others itemize because they own a home or make charitable donations. The problem is that assumptions often replace calculations.
Without comparing the two options, you may be leaving money on the table.
This guide is designed to help you make an informed decision for the 2026 tax year.
What Are Tax Deductions?
A tax deduction is an expense or allowance that reduces your taxable income.
Taxable income is the portion of your income that the government uses to calculate how much tax you owe.
For example, if you earn $70,000 and claim $20,000 in deductions, you are only taxed on $50,000. Deductions do not reduce your tax dollar for dollar, but they lower the income that your tax rate is applied to.
Deductions are different from tax credits. A deduction lowers taxable income, while a credit reduces your actual tax bill. Both are helpful, but they work in different ways.
The standard deduction and itemized deductions are the most common deductions for individual taxpayers. You must choose one or the other each year.
Above-the-Line vs Below-the-Line Deductions
Not all deductions work the same way. Some deductions are called above-the-line deductions.
These reduce your income before your adjusted gross income, or AGI, is calculated. Examples include student loan interest and certain retirement contributions.
Below-the-line deductions are taken after AGI is calculated. This is where the standard deduction and itemized deductions fall. You can only choose one of these options, not both.
This distinction matters because some tax benefits are based on your AGI. Lowering your AGI with above-the-line deductions can sometimes help you qualify for other credits or deductions.
You can learn more about how deductions work from the Internal Revenue Service.
Who Can Claim Deductions?
Most taxpayers can claim either the standard deduction or itemized deductions, but the amount depends on your filing status.
Filing status includes single, married filing jointly, married filing separately, and head of household.
Some taxpayers may have limitations. For example, if someone else can claim you as a dependent, your standard deduction may be limited. Certain high-income taxpayers may also see limits on specific itemized deductions.
The key point is that deductions are available to most people, but the value of each option varies. That is why comparing the standard deduction and itemized deductions is so important, especially in a changing tax year like 2026.
What Is the Standard Deduction?
The standard deduction is the simplest way to reduce your taxable income.
Instead of listing out individual expenses, you claim one fixed deduction amount based on your filing status.
For many taxpayers, this option is easy, predictable, and requires very little paperwork.
The standard deduction is a flat dollar amount that reduces your taxable income. It is available to taxpayers who choose not to itemize their deductions. Once you take the standard deduction, you cannot deduct individual expenses such as mortgage interest or charitable donations for that tax year.
The purpose of the standard deduction is to simplify the tax filing process. It allows taxpayers with relatively simple financial situations to reduce their taxable income without tracking receipts or completing additional forms.
You either take the standard deduction or itemize your deductions. You cannot do both in the same year.
Standard Deduction Amounts for 2026
The standard deduction amounts are set by law and adjusted periodically.
For several years, these amounts were increased under the Tax Cuts and Jobs Act.
The One Big Beautiful Bill Act, signed into law on July 4, 2025, permanently extended these elevated standard deduction amounts.
As a result, the standard deduction for 2026 has increased to approximately $15,750 for single filers and $31,500 for married filing jointly, adjusted for inflation. This means the higher standard deduction you have benefited from in recent years is not going away.
However, 2026 is still a critical year for reviewing your deduction strategy, because other changes — including the expanded SALT cap — may shift the balance toward itemizing for certain taxpayers.
Who Typically Benefits from the Standard Deduction?
You typically benefit from the standard deduction if your deductible expenses are relatively low.
This often applies if you rent your home, do not have large medical bills, or make modest charitable donations.
W-2 employees with steady income and few major deductions often find that the standard deduction provides the best result. It is also common for younger taxpayers and those without dependents to benefit from this option.
If your financial life is straightforward, the standard deduction often makes sense, especially when itemized deductions do not add up to a higher total.
Advantages of Taking the Standard Deduction
One of the biggest advantages of the standard deduction is simplicity.
You do not need to track receipts, calculate limits, or worry about missing documentation.
It also reduces the chance of errors on your tax return. With fewer numbers to report, there is less room for mistakes. In general, returns that take the standard deduction involve less scrutiny than those with complex itemized claims.
The standard deduction also saves time. If you want a faster and easier filing process, this option can be very appealing.
What Are Itemized Deductions?
Itemized deductions allow you to list specific expenses you paid during the year and subtract the total from your taxable income. Instead of taking one flat amount like the standard deduction, you add up qualifying costs and claim the combined total.
Itemizing takes more time and effort, but it can result in bigger tax savings if your eligible expenses are high enough.
Itemized deductions are individual expenses that the tax law allows you to deduct from your income. To itemize, you must report these expenses on Schedule A of your tax return.
You should only itemize if the total of your itemized deductions is greater than the standard deduction available to you. If it is not, the standard deduction will usually save you more.
Itemizing requires careful record keeping and accurate calculations. You must be able to support the amounts you claim if asked.
Common Types of Itemized Deductions
Several types of expenses commonly appear on Schedule A.
Mortgage interest is one of the largest expenses for many homeowners. If you have a qualifying home loan, the interest you pay during the year may be deductible.
State and local taxes are another major category. These include property taxes and state income or sales taxes, though limits apply. Charitable contributions are also common. Donations to qualified charities may be deductible if you have proper documentation.
Medical and dental expenses can be itemized as well, but only the portion that exceeds a certain percentage of your adjusted gross income.
Because of this threshold, medical deductions tend to benefit taxpayers with unusually high healthcare costs.
The SALT Deduction Cap
The SALT deduction refers to the deduction for state and local taxes.
This includes state income taxes and property taxes. Prior to 2025, this deduction was capped at $10,000 per return under the Tax Cuts and Jobs Act.
However, recent legislation under the OBBBA (One Big Beautiful Bill Act) increased the SALT deduction cap to $40,400 for certain qualifying income earners. This significantly expands the potential benefit of itemizing for taxpayers in high-tax states who previously hit the $10,000 limit.
That prior $10,000 cap significantly reduced the benefit of itemizing for taxpayers in high-tax states. Even those paying far more than $10,000 in state and local taxes were unable to deduct the excess — until now.
The $40,400 cap for 2026 is available in full to taxpayers with a modified adjusted gross income (MAGI) of $500,000 or below, for both single and joint filers.
Above that threshold, the cap is reduced by $0.30 for every dollar of MAGI over $500,000. At approximately $600,000 in MAGI, the cap reverts to the prior $10,000 limit. For married filing separately, the threshold is $250,000 and the maximum cap is $20,000.
With the higher $40,400 cap available to eligible taxpayers, itemizing may now produce substantially greater savings than in prior years.
The increased threshold makes it more likely that homeowners and higher-income earners in high-tax states will benefit from itemized deductions in 2026 — though taxpayers near or above the $500,000 MAGI threshold should calculate carefully.
The $40,400 SALT cap is now law through 2029 under the OBBBA. It is scheduled to revert to $10,000 in 2030, which is where future policy debate lies — but for 2026, the expanded cap is settled.
Record Keeping Requirements
Itemizing deductions requires strong record-keeping.
You should keep receipts, bank statements, donation acknowledgments, and loan interest statements.
Good records protect you if questions arise later and make it easier to prepare your return accurately. Missing documentation can lead to denied deductions or added stress during filing.
If you prefer not to manage this level of detail, the standard deduction may be more appealing.
Key Differences Between Standard and Itemized Deductions
The easiest way to understand the difference between the standard deduction and itemized deductions is to compare them side by side.
The table below highlights how each option works and what you should consider when choosing between them for the 2026 tax year.
| Factor | Standard Deduction | Itemized Deductions |
|---|---|---|
| How it works | You claim one fixed deduction amount based on your filing status. | You list and total specific deductible expenses on Schedule A. |
| Ease of use | Very simple and quick to claim. | More complex and time-consuming. |
| Record keeping | Minimal or none required. | Detailed records and receipts required. |
| Flexibility | Same amount for everyone with the same filing status. | Varies based on your actual expenses. |
| Who it benefits most | Taxpayers with few deductible expenses. | Taxpayers with high mortgage interest, taxes, or medical costs. |
| Audit risk | Generally lower due to fewer entries. | Slightly higher due to multiple claimed expenses. |
| Impact of 2026 changes | May decrease if current tax law expires. | May become more attractive if limits change. |
| Time required | Minimal preparation time. | Requires careful calculation and review. |
This comparison shows that neither option is better for everyone.
The standard deduction is about simplicity and predictability. Itemized deductions are about customization and potentially higher savings.
Your goal in 2026 is to choose the option that results in the lower taxable income, not the one that feels easiest or most familiar.
2026 Tax Law Changes You Need to Know
The 2026 tax year is important because several major tax rules have changed.
Many of the provisions that shaped how deductions work over the past several years were originally temporary — but the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, permanently extended the core rules while also introducing significant new changes.
Understanding what stayed the same and what changed is essential for making the right deduction choice in 2026.
1 - How the OBBBA Permanently Extended TCJA Provisions
The Tax Cuts and Jobs Act, passed in 2017, made sweeping changes to individual tax rules.
Many of these provisions were originally set to expire after 2025, but the One Big Beautiful Bill Act, signed on July 4, 2025, permanently extended the core TCJA tax rules for individuals.
This means the higher standard deduction, lower rates, and other key provisions are no longer at risk of expiring — but the OBBBA also introduced new changes that affect deduction planning.
One of the biggest impacts was a much higher standard deduction paired with tighter limits on itemized deductions. This combination caused millions of taxpayers to stop itemizing and switch to the standard deduction.
Because the OBBBA has permanently extended these core provisions, the risk of major disruption to deduction rules has passed. However, the new changes introduced by the OBBBA — particularly the expanded SALT cap — mean taxpayers should still review their strategy rather than relying on past filing habits.
You can track official updates on expiring provisions through the Internal Revenue Service
2 - The Standard Deduction in 2026
The standard deduction remains historically high in 2026.
The OBBBA permanently extended the elevated amounts established under the Tax Cuts and Jobs Act, and indexed them for inflation going forward.
For 2026, the standard deduction is approximately $15,750 for single filers and $31,500 for married filing jointly.
While the standard deduction is not decreasing, the expanded SALT cap under OBBBA means more taxpayers may now find that itemizing surpasses the standard deduction — particularly homeowners and those in high-tax states.
3 - Changes to Itemized Deduction Limits
Itemized deductions were also affected by the 2017 tax law.
One of the most notable changes was the $10,000 cap on the state and local tax deduction, often called the SALT cap.
Under the OBBBA, the SALT cap has been increased to $40,400 for tax year 2026 for qualifying income earners — specifically those with a MAGI of $500,000 or below. This is a substantial shift from prior limits and restores much of the deduction value that was previously restricted.
The cap is permanent law through 2029, providing planning certainty for taxpayers in high-tax states.
4 - How These Changes Affect Your Choice
The combined effect of the expanded SALT cap and the permanence of the elevated standard deduction creates a more nuanced decision in 2026. More taxpayers — particularly homeowners and those in high-tax states — may find that itemizing once again produces greater savings.
The key takeaway is that 2026 is not a year to assume your deduction choice stays the same.
Comparing both options carefully will be more important than ever.
When the Standard Deduction Usually Saves More
Even with the 2026 tax law changes now in effect, there are many situations where the standard deduction is still likely to save you more money.
The key is whether your itemized expenses add up to more than the standard deduction available for your filing status.
Here are some common situations where the standard deduction usually makes the most sense.
Low to Moderate Income Earners
If you earn a low to moderate income, your deductible expenses are often limited.
You may not have large mortgage interest payments, high medical bills, or significant charitable donations.
In these cases, itemized deductions often fall short of the standard deduction. Taking the standard deduction allows you to reduce your taxable income without the effort of tracking expenses that do not add up to much.
For many taxpayers in this group, the standard deduction provides the best balance of savings and simplicity.
Renters and Non-Homeowners
If you rent your home, you miss out on one of the biggest itemized deductions, which is mortgage interest.
Without that deduction, it can be difficult for itemized expenses to exceed the standard deduction.
Renters may still have charitable donations or medical expenses, but these often are not enough on their own to justify itemizing. As a result, renters commonly benefit more from the standard deduction.
This is especially true if the standard deduction remains relatively high compared to itemized limits.
Taxpayers Without Large Medical or Charitable Expenses
Medical expenses are only deductible if they exceed a certain percentage of your adjusted gross income. Many taxpayers never cross that threshold.
Charitable donations also need to be significant to make itemizing worthwhile.
If your medical costs are average and your charitable giving is modest, itemized deductions may not add up to much. In that situation, the standard deduction usually produces a larger reduction in taxable income.
The standard deduction works well when your expenses are steady and predictable.
Single Filers vs Married Filing Jointly
Single filers often find it harder to benefit from itemizing unless they have substantial deductions.
Married couples filing jointly receive a higher standard deduction, which raises the bar even further for itemized deductions to exceed it.
Unless both spouses have significant deductible expenses, the standard deduction often wins. This is why many married couples choose the standard deduction year after year.
That said, every household is different. Running the numbers is always the best approach.
When Itemized Deductions Usually Save More
Itemized deductions usually save you more when you have specific expenses that add up quickly.
In these cases, listing out deductions can reduce your taxable income far more than the standard deduction ever could.
As tax rules shift in 2026, more taxpayers may find themselves back in this category.
Here are common situations where itemizing often leads to bigger tax savings.
Homeowners with Significant Mortgage Interest
If you own a home and have a sizable mortgage, the interest you pay each year can be a major deduction.
For many homeowners, mortgage interest alone accounts for a large portion of their itemized deductions.
This is especially true in the early years of a mortgage, when interest payments are highest. When combined with property taxes and other deductible expenses, itemizing often beats the standard deduction.
When combined with property taxes, PMI, and other deductible expenses, itemizing often beats the standard deduction.
Homeowners should always calculate their potential itemized deductions instead of assuming the standard deduction is better.
High Medical Expenses
Medical and dental expenses can be itemized if they exceed a certain percentage of your adjusted gross income.
While many taxpayers never reach this threshold, those with major health events often do.
Costs such as surgeries, long-term treatment, prescriptions, and specialized care can add up quickly. When they exceed the income-based limit, itemizing can significantly reduce taxable income.
This situation is more common among retirees and families dealing with unexpected medical needs.
Substantial Charitable Giving
If you make large charitable contributions, itemizing may save you more. Donations to qualified charities can be deducted if you have proper documentation.
This applies to both cash donations and certain non-cash contributions. When charitable giving is a consistent part of your financial life, itemized deductions often grow well beyond the standard deduction.
First, itemizers are now subject to a 0.5% of AGI floor on charitable deductions — meaning only the amount that exceeds 0.5% of your AGI is deductible.
Second, taxpayers in the 37% tax bracket have their charitable deduction capped at 35 cents per dollar donated.
When charitable giving is a consistent part of your financial life, itemized deductions can still grow well beyond the standard deduction — but these new limits mean donors should calculate their actual deductible amount carefully rather than assuming the full donation is deductible.
High State and Local Taxes
Taxpayers who live in states with higher income or property taxes may benefit from itemizing, especially if future tax law changes affect the current limits.
With the SALT cap increased to $40,400 under the OBBBA for eligible income earners, itemizing has become significantly more attractive for taxpayers in high-tax states. This higher cap allows more state income taxes and property taxes to be deducted, which can substantially increase total itemized deductions.
Even with prior limitations, state and local taxes formed a meaningful part of itemized deductions. Now, with the expanded cap, many taxpayers who previously exceeded the $10,000 limit may find itemizing clearly surpasses the standard deduction in 2026.
This group should pay close attention to legislative updates and re-evaluate their deduction strategy each year.
Business owners and partners in pass-through entities should also be aware of the Pass-Through Entity (PTE) tax election.
More than 35 states have authorized PTE workarounds that allow eligible businesses to pay state taxes at the entity level rather than the individual level, effectively bypassing the SALT cap.
The OBBBA preserved this workaround. Even with the higher $40,400 cap, the PTE election may provide additional tax savings for qualifying business owners — making it worth discussing with a tax professional.
Conclusion
The most important takeaway is that there is no universal answer.
Some taxpayers will still benefit more from the standard deduction because of its simplicity and consistency. Others may find that itemized deductions provide greater savings, especially if they have mortgage interest, medical expenses, charitable contributions, or higher state and local taxes.
With the SALT cap increased to $40,400 for eligible income earners under the OBBBA — specifically those with a MAGI of $500,000 or below — the balance in 2026 may shift more strongly toward itemizing for taxpayers in high-tax states.
This makes it even more important to compare both options carefully rather than relying on past filing habits.
The smartest approach is to review both options carefully.
Planning early also gives you time to adjust, whether that means tracking expenses more carefully or reconsidering your overall tax strategy.
This is where professional guidance can be especially valuable.
Virtue CPAs helps individuals and families evaluate their deduction options, plan ahead for tax law changes, and make confident filing decisions.
If you want to be prepared for 2026 and make sure you are choosing the deduction that saves you the most, now is the time to act.
Contact Virtue CPAs today to schedule a consultation and get personalized guidance tailored to your financial situation.
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Rick Patel
