Who Should Itemize Deductions Under the Trump Tax Plan

With President Trump’s new tax plan passing the House on May 22, the new legislation could determine when you have to choose the standard deduction or itemize deductions. The proposal includes extensions and changes to several provisions that were originally introduced in the 2017 Tax Cuts and Jobs Act (TCJA), which are set to expire at the end of 2025. These changes may affect your tax liability depending on your income, filing status and the type of deductions that you qualify for. Since the bill still needs approval from the Senate, you should stay informed and review how it could affect your tax planning.

A financial advisor can help optimize your credits and deductions in a tax strategy that aims to minimize your liability.

Comparing Standard vs. Itemized Deductions

When you file your taxes, you can either take the standard deduction or itemize deductions—whichever results in lower taxable income. The standard deduction offers a fixed amount based on your filing status, while itemizing lets you deduct certain eligible expenses such as mortgage interest, medical bills and charitable donations.

The TCJA nearly doubled the standard deduction. Trump’s plan started with the 2018 tax year and is currently scheduled to end after 2025. It also suspended the personal exemption, which previously reduced taxable income based on household size.

Under the TCJA, the 2025 standard deduction is $15,000 for single filers and those married filing separately, $30,000 for joint filers and $22,500 for heads of household.

The new Trump tax plan would increase those amounts through 2028 and then revert to existing levels. Under this legislation, singles and separate filers would get an additional $1,000. Joint filers would have an increase of $2,000, while heads of household would receive $1,500.

Here’s how the TCJA standard deduction compares with the House-approved Trump plan:

Standard Deduction: 2017 vs. 2025 vs. Proposed Trump Plan

These increases may change whether you can still itemize deductions. For example, if your deductible expenses add up to less than the standard deduction under the new plan, then you would have to take the standard deduction.

What Can You Itemize as a Deduction?

When you itemize deductions, you are listing expenses that will later be subtracted from your adjusted gross income to reduce your taxable income. If your total itemized expenses are higher than your standard deduction, itemizing may result in a lower tax bill.

Not all expenses qualify. The IRS allows certain categories such as:

• Medical and dental expenses (above a threshold)
• State and local taxes, including property and sales tax
• Mortgage interest and loan points
• Investment interest
• Charitable donations
• Tax preparation fees
• Certain unreimbursed employee expenses
• Eligible business expenses
• Casualty, disaster and theft losses

These are known as “below-the-line” deductions because they come after calculating adjusted gross income. In contrast, some deductions—like IRA contributions—can be taken “above-the-line” and don’t require itemizing.

Under the new Trump tax plan, most existing itemized deduction categories remain unchanged. But, the cap on state and local tax (SALT) deductions is temporarily increased. This change could raise the total deductible amount for taxpayers in high-tax states, making itemizing more favorable than the standard deduction.

How the SALT Deduction Cap Could Affect Itemized Deductions

When the TCJA went into effect, many taxpayers stopped itemizing because the standard deduction became much larger and the SALT deduction was capped at $10,000 ($5,000 for married taxpayers filing separately). This limit reduced the advantage of itemizing, especially for people in states with high property or income taxes.

The new Trump tax plan would raise the SALT deduction cap to $40,000 for most filers and $20,000 for married individuals filing separately. This change could make itemizing more appealing for households with significant state and local tax payments.

However, you should also note that the expanded cap begins to phase out if your income exceeds $500,000 ($250,000 for those filing separately), which would reduce the benefit by 30% of the income over that threshold. But even with the phaseout, the deduction cannot drop below the TCJA minimum of $10,000 ($5,000 if filing separately).

What the new Trump tax plan could mean for you:

• If your income is below the phaseout level and you live in a high-tax area, itemizing may offer more savings than the standard deduction.
• If your income is above the phaseout threshold, the deduction may be reduced but will not be less than current limits.
• The higher SALT cap is only set to apply for 2025, with the phaseout increasing by 1% annually after 2026 and before 2034, according to text from the amended House bill.

Who Should Itemize Deductions in 2025 and Beyond?

As we discussed earlier, the new Trump proposal includes a temporary increase to the SALT deduction cap and introduces a formula that reduces the value of itemized deductions for higher-income taxpayers. This may affect whether itemizing is beneficial depending on your income, filing status and deductible expenses.

If your total itemized deductions exceed the standard deduction for your filing status, itemizing may still lower your tax bill. The proposed standard deduction is $16,000 for single filers and married individuals filing separately, $32,000 for married couples filing jointly and $24,000 for heads of household. Taxpayers with deductible expenses such as mortgage interest, property taxes and charitable contributions may find itemizing more beneficial—especially if they live in high-tax states.

However, the bill adds a phase-down provision for itemized deductions based on taxable income. Specifically, itemized deductions are reduced by:

• 5/37 of the lesser of state and local tax deductions or excess income over the 37% tax bracket threshold, and
• 2/37 of the lesser of remaining deductions or remaining excess income over that threshold.

This formula may reduce or eliminate the benefit of itemizing for higher-income individuals, even if they have large deductible expenses. Therefore, while more taxpayers may consider itemizing due to the temporarily expanded SALT cap, the phase-down rule means high-income filers may not see a full benefit.

In short, calculate your itemized deductions, compare them to the increased standard deduction and account for any reduction under the new phase-down rules to determine if itemizing makes sense in 2025.

Examples of Standard and Itemized Deductions

Let’s review the table below to help you determine when it makes sense to take the standard deduction or itemize with the higher Trump tax plan SALT deduction cap.

When You Should Itemize: TCJA vs. New Trump Tax Plan

Key Takeaways:

• Under TCJA: The SALT cap stays at $10,000, so itemizing usually only helps if your mortgage interest, charitable donations and other deductions exceed the $30,000 standard deduction for joint filers.
• Under the House-approved Trump tax plan: The SALT cap is temporarily raised to $40,000, but phases down by 30% of income above $500,000 MAGI. Itemizing may save more if total deductions exceed the standard deduction and income stays under the phaseout threshold.

Winners and Losers: Itemized Deductions Under the New Trump Plan

The $40,000 SALT deduction cap increase in the new Trump tax bill can benefit middle- and upper-middle-income itemizers in high-tax states, particularly joint filers with MAGI under $500,000. For those earning above that income threshold ($250,000 for separate filers) the benefit is phased down and eventually limited. Residents in low-tax states and standard deduction users experience little to no change.

To recap, the table below summarizes how the new House-approved Trump tax plan could impact different groups:

Bottom Line

Itemizing makes sense when your deductions are greater than the standard deduction. Since the TCJA significantly raised the standard deduction starting in 2018, many filers who itemized in 2017 stopped doing so through 2025. Under the new Trump tax plan, the standard deduction would go up again from 2025 to 2028. The higher SALT deduction cap could make itemizing worthwhile for some, but high earners may get less benefit due to income-based phaseouts.

Tips to Get You Through Tax Season

• A financial advisor with tax expertise can help you at tax time. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Keeping all of your tax documents organized will help you ace your tax filing. If you choose to itemize, staying organized includes keeping all your receipts. You should keep receipts for at least a few years after you file. It isn’t uncommon for the IRS to also look at returns from three to six years prior to the return they are actually auditing. And depending on which deductions you take, like the home office deduction, your return may be more likely to trigger an audit.
• When you file your taxes, there are quite a few tax filing services to choose from. Two of the most popular, H&R Block and TurboTax both offer a user-friendly design with good explanations of the filing process. Here’s a breakdown to help you decide which service may be better for you.

Photo credits: ©iStock.com/emmgunn, ©iStock.com/izusek, ©iStock.com/PeopleImages