2025 Tax Changes: What the Bigger Standard Deduction Means for You
The new tax law—officially known as the One Big Beautiful Bill Act (OBBBA)—brings several important updates starting in 2025. One of the biggest changes? A significantly larger standard deduction, which could lower your tax bill.
But should you still consider itemizing your deductions? Let’s break it down.
Why the Bigger Standard Deduction Matters
The standard deduction is the fixed amount you can subtract from your income before taxes are calculated. When that number goes up, you keep more of your income—and for many people, that means less need to itemize.
What You’ll Gain:
✅ Lower Taxable Income – A higher deduction reduces the income you’re taxed on, which could mean more money in your pocket.
✅ More Help for Families – The expanded Child Tax Credit of $2,200 per child is now permanent.
New Deductions—Even If You Don’t Itemize
Even if you don’t itemize, the OBBBA offers a few extra perks:
- Tip income and overtime pay deductions (with some income restrictions)
- Partial car loan interest deduction (if the car meets certain qualifications)
- Starting in 2026: up to $1,000 for single filers or $2,000 for couples in charitable contributions—even if you don’t itemize
When Itemizing Still Makes Sense
The higher standard deduction won’t benefit everyone equally. If you have high-deductible expenses, you might still save more by itemizing. Here are a few situations where it could be worth it:
🏠 State & Local Taxes (SALT): In 2025, the deduction cap temporarily jumps to $40,000, helping those in high-tax states—though it phases out for higher earners.
🏡 Mortgage Interest: If you have a significant mortgage, you may benefit from itemizing, especially with the $750,000 loan cap remaining in place.
💝 Charitable Donations: Giving big? You might get more tax savings by itemizing—just note that starting in 2026, you’ll only be able to deduct contributions that exceed 0.5% of your income.
🏥 Medical Expenses: If you’ve had high out-of-pocket medical costs, itemizing could still offer relief.
What’s Going Away
Not all deductions survived the OBBBA. Some commonly used ones are now permanently eliminated:
❌ Unreimbursed employee expenses and other miscellaneous deductions are gone.
❌ Home equity loan interest is only deductible if the money is used to buy, build, or improve your home.
❌ Starting in 2026, the tax benefit of itemized deductions for high earners is capped at 35% of their value.
💼 Need Help Deciding? Talk to Senter CPA.
Tax law changes can get complicated fast. If you’re unsure whether to itemize or take the standard deduction in 2025, Senter CPA can help you run the numbers, explore your options, and build a tax strategy that works for you.
📞 Contact us today to schedule a consultation and take full advantage of the new tax landscape.
