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Filing Form 1040 with itemized deductions means attaching Schedule A and claiming the total of your deductible medical costs, state and local taxes, mortgage interest, charitable gifts and a few other items instead of the standard deduction. You pick whichever is larger. The One Big Beautiful Bill Act (OBBBA), signed in July 2025, changed that comparison more than any law since 2017. It quadrupled the state and local tax (SALT) cap, raised the standard deduction, and, starting with 2026 returns, added new limits on charitable deductions and on the value of itemizing for people in the top bracket.
All figures below come from IRS forms, instructions and releases for 2025 and 2026.
The IRS confirmed both years' standard deduction amounts in IR-2025-103. The 2025 figures are the OBBBA amounts that replaced the ones announced in late 2024.
| Filing status | 2025 standard deduction | 2026 standard deduction |
|---|---|---|
| Single or married filing separately | $15,750 | $16,100 |
| Married filing jointly or surviving spouse | $31,500 | $32,200 |
| Head of household | $23,625 | $24,150 |
For 2026, an unmarried filer who is 65 or older or blind adds $2,050, and each qualifying married filer adds $1,650, according to the 2026 Form 1040-ES. Those add-ons apply only if you take the standard deduction.
One point trips people up. The OBBBA's new deductions for tips, overtime, car loan interest and the enhanced senior deduction (up to $6,000 per eligible person for 2026, per the 1040-ES) are claimed on Schedule 1-A, and the IRS instructions say you can take them even if you itemize. So the choice between Schedule A and the standard deduction no longer costs a senior the extra $6,000.
Married couples filing separately face a hard rule: if one spouse itemizes, the other's standard deduction is zero.
The 2025 Instructions for Schedule A list the categories. Here is how each line works in practice.
You deduct only the part of unreimbursed medical and dental costs that exceeds 7.5% of AGI (Form 1040, line 11b). Premiums count, but not premiums paid pre-tax through payroll and not amounts you already took as the self-employed health insurance deduction. A household with $120,000 of AGI needs more than $9,000 of qualifying costs before a single dollar counts.
Line 5a takes state and local income taxes or general sales taxes, not both. Line 5b is real estate tax on property you hold personally, and 5c is personal property tax, but only tax based on value alone and imposed yearly. Line 5e applies the cap. Property tax on a rental building belongs on Schedule E, not here; the IRS Schedule E guide to reporting rental income and loss shows where those expenses go, and they are not subject to the SALT cap.
Home mortgage interest is deductible on up to $750,000 of acquisition debt taken out after December 15, 2017 ($375,000 if married filing separately), or $1,000,000 for qualifying debt taken out on or before that date. Line 8d, mortgage insurance premiums, is "reserved for future use" on the 2025 form, so PMI is not deductible for 2025. Investment interest on line 9 is figured on Form 4952 unless you meet the three-part exception in the instructions.
Cash gifts go on line 11, property on line 12, and Form 8283 is required when noncash gifts exceed $500. Any single gift of $250 or more needs a contemporaneous written acknowledgment from the charity, obtained by the earlier of your filing date or the extended due date. If cash gifts exceed 30% of AGI, or gifts of capital gain property exceed 20%, the instructions send you to Pub. 526 for the limits and carryover. Holding period and basis records for donated securities follow the same rules covered in our guide to Schedule D and Form 8949 for capital asset sales.
For 2025, personal casualty and theft losses count only if they come from a federally declared disaster, and only after a $100 per-event reduction and a 10%-of-AGI floor. Line 16 covers a short list: gambling losses up to gambling winnings, estate tax on income in respect of a decedent, and a few others. Unreimbursed employee expenses and tax prep fees are not on the list.
Line 17 is the total, which carries to Form 1040, line 12e. Line 18 lets you itemize even when the total is lower than your standard deduction, which sometimes makes sense for a state return.
The 2025 instructions state that the SALT limit rose from $10,000 to $40,000 ($20,000 married filing separately). It phases down when modified AGI exceeds $500,000 ($250,000 married filing separately). The SALT worksheet subtracts 30% of the excess from $40,000, and the cap never falls below $10,000 ($5,000 married filing separately).
2025 worked example. A married couple has MAGI of $560,000 and paid $48,000 in state income and property taxes.
At MAGI of $600,000 or more, the reduction reaches $30,000 and the cap bottoms out at $10,000. That range between $500,000 and $600,000 behaves like an extra 30% add-on to every dollar of income for anyone whose SALT exceeds the cap.
For 2026, the IRS draft 2026 Schedule A raises the line 5e cap to $40,400 ($20,200 married filing separately) and the phase-down threshold to $505,000 ($252,500 married filing separately). The draft points to the instructions for the full worksheet, which the IRS had not finalized at the time of writing.
Business owners in high-tax states have another route. Many states let partnerships and S corporations pay an elective entity-level tax that is deducted on the business return, outside the individual cap. Our explainer on how the pass-through entity tax turns state tax into a federal deduction walks through the mechanics.
The draft 2026 form and the 2026 Form 1040-ES list several changes that will apply to returns filed in 2027.
| Item | 2025 return | 2026 return |
|---|---|---|
| SALT cap | $40,000, phase-down above $500,000 MAGI | $40,400, phase-down above $505,000 MAGI |
| Mortgage insurance premiums | Line 8d reserved, not deductible | Line 8d restored for mortgage insurance premiums |
| Charitable floor for itemizers | None | Only gifts above 0.5% of AGI count |
| Charity for non-itemizers | No deduction | Up to $1,000 cash ($2,000 joint) |
| Personal casualty losses | Federally declared disasters | Federally or state-declared disasters |
| Gambling losses | Up to winnings | Limited to 90% of winnings |
| Educator expenses | Schedule 1 only | Schedule 1, plus a Schedule A line for the rest |
| Overall limit | None | Reduction for the 37% bracket (below) |
The 0.5% floor matters more than it looks. A couple with $400,000 of AGI loses the first $2,000 of giving each year. Amounts under the floor are added to the charitable carryover, according to the 1040-ES, so they are not lost permanently, but they only help in a later year when you itemize again.
The non-itemizer charity deduction covers cash gifts only. Donated clothing, stock and other property do not qualify, per the IRS OBBBA provisions page.
The old Pease limitation is gone for good. In its place, the OBBBA trims the value of itemized deductions for people in the 37% bracket. The 2026 Form 1040-ES describes it this way: itemized deductions are reduced by 5.4% (the statutory 2/37) of the lesser of total itemized deductions or the amount by which income exceeds the 37% bracket threshold:
The draft 2026 Schedule A runs the test on line 18 using Form 1040 line 11b minus the QBI deduction and Schedule 1-A deductions, which is income before itemized deductions. If that number is over $384,350, you complete a worksheet. The limit is applied after every other limitation and does not affect the Section 199A QBI deduction.
2026 worked example. A married couple has $1,000,000 of income before itemized deductions, no QBI deduction, and $100,000 of itemized deductions.
At a 37% rate, $94,595 of deductions saves $35,000, the same as a 35% rate on $100,000. In effect, each itemized dollar is worth 35 cents for these households instead of 37. Planning for families at this level, including timing of large gifts, is covered in our high-net-worth tax filing guide.
With a $40,000 SALT cap, the break-even point moved. Before 2025, a married couple in a high-tax state often maxed out at $10,000 of SALT and needed $20,000 or more of mortgage interest and giving to beat the standard deduction. Now the taxes alone can do most of the work.
Take a 2025 joint return with $250,000 of AGI:
| Expense | Amount | Deductible on Schedule A |
|---|---|---|
| State income tax | $14,000 | $14,000 |
| Home property tax | $11,000 | $11,000 |
| Mortgage interest (Form 1098) | $9,500 | $9,500 |
| Cash gifts to charity | $3,000 | $3,000 |
| Medical costs | $12,000 | $0 (under 7.5% of AGI, $18,750) |
| Total | $37,500 |
Under the old $10,000 cap this couple would have itemized $22,500 and taken the standard deduction. In 2025 they itemize $37,500, which is $6,000 above the $31,500 standard deduction. At a 24% marginal rate, that is about $1,440 of federal tax saved.
Renters with no mortgage and moderate state tax still usually land below the standard deduction. Self-employed owners should also check which expenses belong on Schedule C instead; our home-based business tax deductions checklist separates the business share of mortgage interest and property tax from the personal share. Landlords can use the rental property tax deductions checklist for the same split.
When itemized deductions sit near the standard deduction, bunching two years of discretionary deductions into one year can beat taking the standard deduction twice. Charitable giving is the easiest lever. Prepaying property tax can help too, but only for tax that has been assessed; the 2025 instructions note that only 2026 property taxes paid in 2025 and assessed before 2026 count for 2025.
The 2026 rules change the math. The 0.5% floor applies each year you itemize, so bunching two years of giving into one year means paying the floor once instead of twice. And in standard-deduction years, the new $1,000 or $2,000 cash gift deduction gives some benefit for routine giving.
If you bunch income-sensitive deductions, revisit withholding or quarterly estimated tax payments so the deduction swing doesn't create an underpayment.
Keep Form 1098 for mortgage interest, W-2 and state return records for income tax, county bills and proof of payment for property tax, written acknowledgments for each gift of $250 or more, and Form 8283 with appraisals where required. Large charitable deductions relative to income are among the common IRS audit triggers, so the paperwork matters more than the number.
State rules differ, so check your state's instructions. Schedule A, line 18 for 2025 (line 19 on the 2026 draft) lets you elect to itemize federally even when the standard deduction is larger, which can be worth it when the state benefit outweighs the federal cost.
No. The enhanced deduction for seniors is claimed on Schedule 1-A and applies whether you itemize or take the standard deduction. Only the extra standard deduction for age 65 or blindness is lost when you itemize.
No. Taxes on rental property are reported on Schedule E and taxes on a business property on Schedule C or the entity return. The cap applies to personal income, sales, real estate and personal property taxes on Schedule A.
Not for 2025. Line 8d on the 2025 Schedule A is reserved, so private mortgage insurance gives no deduction. The draft 2026 form restores line 8d for mortgage insurance premiums, so keep the 2026 premium figure from your lender's Form 1098.
A simple Schedule A with a mortgage and a few gifts is manageable in software. Returns that hit the SALT phase-down, the 2026 top-bracket limit, or large noncash gifts are where a preparer earns the fee. See what a CPA charges for tax preparation and whether you need a CPA or a tax preparer.
Madras Accountancy prepares and reviews individual returns for US CPA firms, including Schedule A work affected by the new SALT phase-down and the 2026 limits. To discuss capacity for the 2026 filing season, contact our team.
The section 4960 excise tax is 21% of nonprofit pay over $1M. From 2026 it covers all employees. See the medical carve-outs, Form 4720 and a worked example.
The paid family and medical leave tax credit is permanent from 2026. See the 12.5% to 25% rates, the premium option, the 6-month rule and how Form 8994 works.
Opportunity zones become permanent in 2027 under the One Big Beautiful Bill. See the new deferral, rural bonus, and the 2026 handoff.
