Before the Tax Cuts and Jobs Act of 2017, roughly 30% of tax filers itemized deductions on Schedule A. By 2024 that share had dropped to around 10–12%. The TCJA nearly doubled the standard deduction and capped SALT at $10,000 — fundamentally changing who benefited from itemizing. The One Big Beautiful Bill Act (OBBBA), signed July 2025, made the higher standard deduction permanent and raised the SALT cap to $40,000 ($40,400 in 2026) with a phaseout for high earners. The math has shifted again: for many homeowners in high-tax states below the phaseout, itemizing is back.
2025 & 2026 Standard Deduction Amounts (OBBBA)
| Filing Status | 2025 | 2026 |
|---|---|---|
| Single / Married Filing Separately | $15,750 | $16,100 |
| Married Filing Jointly / Qualifying Widow(er) | $31,500 | $32,200 |
| Head of Household | $23,625 | $24,150 |
| Age 65+ or blind (single add-on, per condition) | +$2,000 | +$2,050 |
| Age 65+ or blind (married add-on, per condition per person) | +$1,600 | +$1,650 |
To benefit from itemizing, your total Schedule A deductions must exceed these amounts. Every dollar of itemized deductions above the standard deduction generates tax savings at your marginal rate.
Example: A single filer in the 22% bracket with $20,000 in itemized deductions saves 22% × ($20,000 − $15,750) = $935 more than taking the standard deduction.
What Can You Itemize? The Schedule A Categories
1. State and Local Taxes (SALT) Property taxes, state income taxes (or sales taxes — your choice), and local taxes combined. Under OBBBA (effective 2025), the cap is $40,000 per return ($20,000 MFS) for 2025 and $40,400 ($20,200 MFS) for 2026, indexed 1% per year thereafter. The cap is reduced by 30¢ per dollar of MAGI above $500,000 ($250,000 MFS) in 2025 — $505,000 ($252,500 MFS) in 2026 — reverting toward a $10,000 floor ($5,000 MFS) for very high earners. Before OBBBA, the cap was a flat $10,000 ($5,000 MFS) with no phaseout from 2018–2024.
2. Mortgage Interest Interest on debt used to buy, build, or substantially improve your primary or second home. For mortgages originated after December 15, 2017, the deduction applies to the first $750,000 of acquisition debt ($375,000 MFS). For mortgages before that date, the limit is $1 million.
3. Charitable Contributions Cash donations to qualifying 501(c)(3) organizations, deductible up to 60% of AGI for cash gifts to public charities. Non-cash property donations have separate limits.
4. Medical and Dental Expenses Only the amount exceeding 7.5% of AGI is deductible. For most people, this threshold is too high to generate a meaningful deduction unless there is a catastrophic medical event.
5. Casualty and Theft Losses Severely restricted under TCJA — only losses from federally declared disasters qualify.
The SALT Cap Is the Key Variable
In high-tax states (California, New York, New Jersey, Massachusetts, Illinois), homeowners with significant property and state income taxes previously hit the $10,000 TCJA SALT cap immediately. Under OBBBA, homeowners below the $500,000 MAGI phaseout ($505,000 in 2026) can deduct up to $40,000 / $40,400 of combined state, local, and property taxes — a 4× jump that pulls many back into itemizing.
How OBBBA’s higher SALT cap affects itemizing threshold (2026 figures, MFJ, MAGI below phaseout):
| Scenario | SALT (capped) | Mortgage Interest | Charitable | Total Itemized | Itemize? vs $31,500 std ded |
|---|---|---|---|---|---|
| High-tax state homeowner, $750K mortgage | $40,400 | $35,000 | $5,000 | $80,400 | Yes — by $48,900 |
| High-tax state homeowner, $500K mortgage | $33,000 (uncapped) | $22,000 | $3,000 | $58,000 | Yes — by $26,500 |
| High-tax state renter, $250K income | $18,000 (uncapped) | $0 | $2,000 | $20,000 | No — under std ded |
| Low-tax state homeowner, $400K mortgage | $8,000 (uncapped) | $18,000 | $5,000 | $31,000 | Barely under |
| Low-tax state renter | $3,000 | $0 | $2,000 | $5,000 | No — far under |
| CA homeowner, $800K MAGI (in phaseout) | ~$31,400 | $35,000 | $5,000 | ~$71,400 | Yes — phaseout still leaves strong itemize |
| NY homeowner, $2M MAGI (past phaseout) | $10,000 (floor) | $40,000 | $5,000 | $55,000 | Yes — mortgage still wins |
When Itemizing Still Wins
High Mortgage Balance
If you bought a home in a high-price market with a large mortgage balance (say $800,000 at 7%), your first-year interest alone is approximately $56,000 — well above the standard deduction even for joint filers. As the loan amortizes and the balance drops, the interest shrinks and eventually the crossover point arrives.
Approximate annual mortgage interest on $750,000 balance:
- 6% rate: ~$44,600 year 1
- 7% rate: ~$52,200 year 1
Major Charitable Giving
Donors who give 10–20% of their income to charity often exceed the standard deduction threshold, especially if they can combine it with mortgage interest or property taxes. Donor-Advised Funds (DAFs) allow “bunching” — contributing multiple years of charitable gifts in a single year to exceed the threshold, while recommending grants to charities over time.
Large Medical Expenses
If you or a dependent faces major surgery, cancer treatment, dental work, or long-term care expenses, and those costs exceed 7.5% of your AGI, the excess is deductible. This is most likely to matter in the year of a serious illness.
Bunching Strategy
Even if your normal annual deductions do not exceed the standard deduction, bunching every other year may help. Prepay next year’s property tax, make two years of charitable donations in a single year, and pay deductible medical expenses strategically. In bunching years, you itemize with a large deduction; in alternating years, you take the standard deduction.
Filing Status and the SALT Cap Asymmetry
The SALT cap is not doubled for married filers — a couple filing jointly gets one $40,000 cap ($40,400 in 2026), not two. Married filing separately gets half ($20,000 / $20,200 in 2026), so in principle each spouse keeps their own lower cap. This creates a marriage penalty for dual-income couples in high-tax states whose combined SALT meaningfully exceeds $40,000. The phaseout compounds this: the $500,000 MAGI threshold is the same for single and MFJ, but halves to $250,000 for MFS ($252,500 in 2026). Filing separately may theoretically help at very high incomes where the joint return phases the cap down to the $10,000 floor, but MFS triggers its own penalties (both spouses must itemize or both take the standard deduction, and several credits are disallowed). Run the numbers both ways before filing.
What Has Not Changed Post-TCJA
- Mortgage interest deduction is still available (lower limit, but still there)
- Charitable deductions are still fully deductible (up to AGI limits)
- Medical expense deduction still exists at 7.5% AGI threshold
- Investment interest expense can still be itemized
Should You Track Itemized Deductions?
Yes — even if you usually take the standard deduction. Keep records of:
- All property tax bills
- Mortgage interest (Form 1098 from your lender)
- Charitable receipts (required for donations over $250)
- Medical receipts (in case of a high-expense year)
If your itemized total is within 10–15% of the standard deduction, watch it carefully. A high-expense medical year or a significant charitable gift could tip you over.
What OBBBA Made Permanent
OBBBA (signed July 2025) replaced the looming TCJA sunset with permanent provisions: the elevated standard deduction, the individual rate schedule, a $2,200 child tax credit, and §199A QBI deduction are all now permanent. The SALT cap was raised from $10,000 to $40,000 ($40,400 in 2026) with 1% annual indexing, and the 30% phaseout above $500,000 MAGI preserves some revenue from the highest earners. For middle- and upper-middle-income homeowners in high-tax states, the “SALT is dead” narrative from 2018–2024 no longer applies — itemizing is meaningfully back on the table.
Bottom Line
The OBBBA SALT cap increase flipped the math for many filers. If you own a home in a high-tax state and your MAGI is below $500,000 ($505,000 in 2026), start with the assumption that itemizing now wins and test it against the standard deduction. For renters, low-tax-state homeowners, and very-high-income filers whose cap phases down to $10,000, the standard deduction remains the default. The bunching strategy still helps those near the threshold. Track your potential deductions annually — the 2025 rules are now durable, so your plan doesn’t need to assume a sunset.