At filing time, taxpayers face a deceptively simple question on their personal tax returns: should they take the standard deduction or itemize deductions? Often, filers develop an autopilot mentality and simply keep making the same choice year after year. As income, investments, and life circumstances evolve and the tax code changes, however, the more tax-efficient choice can shift from one year to the next. Because of this, it’s important to reconsider annually whether or not to itemize.
This decision can be particularly consequential for business owners and high earners. Choosing wisely is an essential part of a broader strategy to optimize your after-tax income. In this article, we walk through what’s new for 2025 and help you understand when it might make more sense to itemize—or not.
Even if your circumstances remain basically the same, the tax code is in constant flux. The One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, ensures that taxpayers will encounter some substantial changes this tax season. Below, we’ve highlighted the changes that are likely to impact high earning individuals. For more information about what OBBBA changed, see this article on IRS website.
The standard deduction is updated each year to keep pace with inflation. The 2018 Tax Cuts and Jobs Act (TCJA) provided for dramatic increases in the standard deduction amounts, and the OBBBA made these increases permanent. For the 2025 tax year, the standard deduction amounts are as follows:
Additionally, for taxpayers who are age 65 or older, a new bonus deduction is available for tax years 2025 through 2028. This is in addition to the pre-existing additional standard deduction for seniors.
This additional deduction, however, phases out for taxpayers with modified adjusted gross income over $75,000 ($150,000 for joint filers), fully phasing out at $175,000 for single filers and $250,000 for joint filers.
The TCJA created a $10,000 cap on the amount of state and local taxes that could be deducted on the federal tax return. The OBBBA raised this cap to $40,000, increasing by 1% per year until 2030, when it will be reset to the $10,000 level. This cap begins phasing down at $500,000 in income and completely phases out at $600,000. These numbers are the same for married and single filers, but the cap and phaseout levels are cut in half for married taxpayers who file separately.
The SALT deduction can be used to offset state and local income taxes or sales taxes (but not both) as well as property taxes paid on items such as homes or vehicles. To claim the SALT deduction, however, it is necessary to itemize.
Since the large boost in the standard deduction mentioned above, itemizing has become less valuable for taxpayers; they must incur much higher amounts of deductible expenses before itemization becomes beneficial. Even so, as your income, investments, and tax liability shift, the right choice can change from one year to the next. Let’s look at some of the key factors that can determine which choice will be more beneficial for you.
The standard deduction is generally preferable if your itemizable expenses don’t meaningfully exceed the standard deduction. On the other hand, consider itemizing if you’ve paid substantial costs for itemizable expenses such as these:
In some cases, costs that would not otherwise be deductible on our personal return may be properly reported as deductible business expenses. While many personal deductions face tougher thresholds, caps, or disallowances, deductions for legitimate business expenses are typically more flexible. For example, expenses associated with home office and work-related vehicle usage can often be deducted as long as records are properly kept, and costs paid for benefits like health insurance and retirement savings, when structured through a business, can reduce personal taxable income. Consult with a trusted tax planning professional each year to understand what costs could be reported as business expenses and whether your itemizable costs justify itemizing.
At Stable Rock, our services go far beyond simply preparing returns. Here are some of the important ways we work with our clients to create strategic plans to maximize their after-tax income.
Although your choice between the standard deduction or itemizing appears on a single line of your tax form, it’s an important decision that can dramatically impact your overall tax liability. Because your income, expenses, and personal life events as well as the tax law change over time, what made sense one year may no longer be optimal the next. With Stable Rock as your strategic tax guide, you can make better informed decisions and adapt your strategy as needed to maximize every deduction available.