U.S. Bank calls out the deduction trap on your taxes

You sit down to file your taxes, click through your software, and accept the standard deduction without giving it a second thought. For years, that shortcut made sense for most filers, and the IRS even made it easier by nearly doubling the amount in 2018.

But the tax code shifted under the One Big Beautiful Bill Act, and the old default may now be costing you money. U.S. Bank is flagging a problem that affects taxpayers across nearly every income bracket and filing status this filing season.

The gap between the standard deduction and what you could claim by itemizing has changed significantly under new legislation. If you are filing your 2025 return without running the numbers both ways, you could be overpaying your federal tax bill by hundreds or thousands of dollars, according to U.S. Bank.

Your standard deduction may not be your best deduction in 2025

The standard deduction for the 2025 tax year is $15,750 for single filers, $31,500 for married couples filing jointly, and $23,625 for heads of household, according to the IRS. Those numbers are fixed, and you get them automatically without tracking a single receipt or documenting any individual expense.

Itemized deductions require you to list and document each eligible expense on IRS Schedule A when you file your federal return. You can claim qualified mortgage interest, state and local taxes, charitable contributions, and unreimbursed medical costs that exceed 7.5% of your adjusted gross income, according to U.S. Bank.

The trap is simple and expensive: most taxpayers take the standard deduction each year without checking whether itemizing would save them more money. With several major deduction limits changing under the OBBBA, that automatic choice deserves a serious second look before you submit your return, according to the IRS.

The SALT cap increase is the biggest change most filers have overlooked

From 2018 through 2024, your combined state and local tax deduction was capped at $10,000 under the Tax Cuts and Jobs Act. That cap pushed millions of homeowners in higher-tax states out of itemizing and onto the standard deduction by default, according to the Bipartisan Policy Center.

The One Big Beautiful Bill Act raised that cap to $40,000 for single filers, heads of households, and married couples filing jointly and $20,000 for those filing separately, effective for the 2025 tax year through 2029, according to the IRS.

For households earning above $500,000 in MAGI, the cap is reduced by 30 cents for every dollar over that threshold, but it cannot fall below $10,000. Once your MAGI exceeds $600,000, you are effectively back to the old cap regardless of how much you pay in state and local taxes, according to H&R Block.

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Mortgage interest and medical expenses still drive the itemizing decision for homeowners

Your mortgage interest deduction remains one of the most powerful reasons to itemize your federal return this filing season. Married couples filing jointly can deduct interest on up to $750,000 of home acquisition debt under current permanent rules.

For mortgages taken out before December 16, 2017, the limit remains $1 million for joint filers, according to U.S. Bank.

Starting in 2026, mortgage insurance premiums will also qualify as deductible mortgage interest under the OBBBA, giving homeowners another reason to consider itemizing. If you are paying PMI on a conventional loan, that expense will count toward your Schedule A total beginning next year, according to H&R Block.

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Medical and dental expenses can also shift the math for taxpayers facing significant unreimbursed healthcare costs during the 2025 tax year. You can deduct unreimbursed medical costs that exceed 7.5% of your AGI, covering surgeries, preventive care, dental work, and prescription medications.

Expenses reimbursed by your insurance company or employer are not eligible for this deduction, according to U.S. Bank. Consider a single filer with $80,000 in AGI who paid $10,000 in unreimbursed medical bills during the 2025 calendar year.

The 7.5% threshold equals $6,000, which means $4,000 of those medical expenses qualify as an itemized deduction on Schedule A. Combined with mortgage interest and state taxes, that total could push past the $15,750 standard deduction threshold for single filers.

Charitable giving strategies can tip the balance toward itemizing your federal return

Cash donations to qualified public charities remain deductible up to 60% of your AGI if you choose to itemize your deductions this year. Gifts to private foundations are capped at 30% of AGI, and both limits apply only when you file Schedule A with your return, according to U.S. Bank.

Starting in 2026, the OBBBA reduces total itemized charitable deductions by 0.5% of AGI for all filers who choose to itemize their returns. A taxpayer earning $200,000 would receive no deduction benefit on the first $1,000 of charitable contributions that year, according to U.S. Bank.

One strategy that financial advisors frequently recommend is bunching your charitable donations into a single tax year for maximum benefit. Instead of giving $5,000 each year for four years, you contribute $20,000 in one year and take the standard deduction in the remaining three.

Key takeaways on charitable deductions

• Cash gifts to public charities are deductible up to 60% of your adjusted gross income for the 2025 tax year, according to U.S. Bank.
• Private foundation gifts are capped at 30% of AGI, and documentation requirements apply to all charitable claims you make.
• A donor-advised fund lets you bunch multiple years of giving into one year to maximize your deduction value on Schedule A.
• The new 0.5% AGI reduction on charitable deductions takes effect in 2026, so front-loading donations into 2025 could save you money.

New above-the-line deductions apply if itemize or take the standard deduction

The OBBBA introduced several deductions available to every eligible taxpayer, regardless of whether they itemize or claim the standard deduction. These reduce your adjusted gross income directly, which means they lower your taxable income before you even choose a deduction method, according to the IRS.

New deductions for the 2025 tax year

• Taxpayers age 65 and older can claim an additional $6,000 deduction, phasing out above $75,000 MAGI for single filers and $150,000 for joint filers, according to the IRS.
• Qualified tip income is deductible up to $25,000 for eligible workers in occupations that customarily receive tips before December 31, 2024, according to the IRS.
• Qualified overtime pay is deductible up to $12,500 for single filers and $25,000 for joint filers through the 2028 tax year, according to H&R Block.
• Interest on auto loans for new U.S.-assembled vehicles purchased after December 31, 2024, is deductible up to $10,000 per return, according to U.S. Bank.

These deductions are separate from your itemizing decision, but they change your AGI and directly affect your 7.5% medical expense threshold. A lower AGI means more of your medical costs become deductible on Schedule A, which could make itemizing more beneficial than you expected.

How to decide whether itemizing makes sense for your 2025 federal tax return

The decision comes down to a single comparison that every taxpayer should run before submitting a return this filing season. Add your mortgage interest, state and local taxes paid, charitable contributions, and qualifying medical expenses on Schedule A together, according to U.S. Bank.

"Taxation of Social Security hasn't changed, but your overall tax bill may be lower because of this deduction," said Catherine Valega, Certified Financial planner founder of Green Bee Advisory.

If that total exceeds your standard deduction, itemizing will lower your tax bill compared to the standard deduction. If the total falls short, you should take the standard deduction and save yourself the paperwork and documentation burden that itemizing requires.

Quick checklist to evaluate your deduction strategy

• Pull your Form 1098 from your mortgage servicer and note your total interest paid, property taxes escrowed, and any PMI premiums.
• Review your W-2 for state and local income taxes withheld, and add any property or personal property taxes you paid separately.
• Gather receipts and acknowledgment letters for all charitable contributions you made during the 2025 calendar year to qualified organizations.
• Total your unreimbursed medical and dental expenses, then subtract 7.5% of your AGI to find your deductible medical amount.
• Compare your Schedule A total to your filing-status standard deduction and choose whichever amount is higher for your federal return.

Tax software will run this comparison automatically, but understanding the inputs gives you control over timing decisions, such as prepaying property taxes. If you are close to the itemizing threshold, shifting one deductible expense into the current year could push you over the line.

Filing mistakes to avoid when choosing between standard and itemized deductions

One common error is assuming the standard deduction is always better simply because it requires less paperwork or documentation effort. That assumption cost taxpayers money before the OBBBA, and it may cost even more now that the SALT cap has quadrupled.

Married couples filing separately face a coordination requirement that catches many filers off guard each tax season. If one spouse itemizes deductions, the other spouse must also itemize, even if the standard deduction would produce a lower tax bill, according to the IRS. Run the numbers for both spouses before deciding on a shared filing strategy for your household.

This decision resets every year with the filing of each new federal tax return, and your approach in 2024 may not work in 2025. Review your situation annually with the new SALT cap and senior bonus deduction in mind, and consult a qualified tax professional if your finances are complex.

Related: A silent tax threat may be lurking in your portfolio

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This story was originally published April 16, 2026 at 2:33 PM.