Who Should Itemize Deductions Under the Trump Tax Plan

Under the Senate’s revised tax proposal, individuals who itemize deductions may see fewer benefits when compared with the House version. The Senate keeps the SALT deduction cap at $10,000 for most taxpayers but introduces a separate formula that allows a higher deduction for pass-through entity taxes (PTETs). This differs from the House bill that was passed on May 22, which raised the overall SALT cap to $40,000 for those earning up to $500,000. For most filers, the higher standard deduction remains the more favorable option unless eligible for additional itemized deductions under the new pass-through rules.

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

Key Takeaways:

• Trump’s new tax plan could raise the standard deduction by $1,000 to $2,000 through 2028 before returning to the current level.
• The Senate bill keeps the $10,000 limit but adds a formula allowing certain pass-through business owners to deduct more based on their PTET amounts.
• The House bill raised the SALT deduction cap to $40,000, but limited high earners with more than $500,000 income.

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 for tax years 2018 through 2025, thereby reducing the need for many taxpayers to itemize deductions. Trump’s plan also capped or limited several itemized deductions, including the state and local tax (SALT) deduction, mortgage interest and medical expenses, while eliminating others like unreimbursed employee expenses.

Here is a breakdown of seven key deductions that changed with the 2017 Trump tax plan:

These changes led to a sharp drop in the number of taxpayers claiming itemized deductions and reduced the overall tax savings from them. According to the Tax Policy Center, 31% of all individual income tax returns had itemized deductions in 2017. But by 2020, less than two-thirds (only 9%) were still itemizing deductions.

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. For a comparison, the 2017 standard deduction before the TCJA was $6,350 for singles and couples filing separately, $12,700 for couples filing jointly and $9,350 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 proposed changes from Trump-backed bills in Congress:

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

The Senate bill does not adopt the broader SALT cap expansion proposed by the House. Instead, it keeps the $10,000 cap in place for most individual taxpayers but introduces a separate calculation for pass-through entity taxes. This new formula allows filers to deduct the greater of $40,000 or 50% of their PTET liability, after subtracting other specified taxes. The approach aims to increase deductions for certain business owners without extending the full SALT benefit to all high-income filers.

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 House bill raised the SALT deduction cap to $40,000 for most filers and $20,000 for married individuals filing separately. This change would make itemizing more appealing for households with significant state and local tax payments.

However, the House bill also included a phaseout for higher earners. The expanded cap began to phase out if your income exceeded $500,000 ($250,000 for those filing separately), reducing the benefit by 30% of the income over that threshold. But even with the phaseout, the deduction would not drop below the TCJA minimum of $10,000 ($5,000 if filing separately).

What the New Trump Tax Plan Could Mean for You:

• Under the Senate bill, most individuals remain subject to the $10,000 SALT cap, though pass-through business owners may deduct more using a separate formula based on their entity-level taxes.
• Under the House bill, the SALT deduction cap increases to $40,000 in 2025 for those earning up to $500,000, making itemizing more beneficial in high-tax states.
• According to text from the amended House bill, the higher SALT cap would apply for 2025, with the phaseout increasing by 1% annually after 2026 and before 2034. The Senate bill does not include this phaseout provision.

Who Should Itemize Deductions in 2025 and Beyond?

As we discussed earlier, the Senate bill keeps the SALT deduction cap at $10,000 for most individuals. It also introduces a new formula that allows certain pass-through business owners to deduct more by claiming the greater of $40,000 or 50% of their pass-through entity taxes, after subtracting other SALT deductions.

The Senate bill does not include any phase-down of itemized deductions for high-income individuals, maintaining a simpler structure than the House proposal. This means taxpayers who qualify under the Senate’s pass-through provision may benefit from increased deductions without a phase-down formula reducing their value.

The House bill, by comparison, included a temporary increase to the SALT deduction cap and introduced a formula that would reduce the value of itemized deductions for higher-income taxpayers. This could 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 House bill added 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 could 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 under the House bill due to the temporarily expanded SALT cap, the phase-down rule means high-income filers may not see a full benefit.

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

As you can see in the example above, the standard deduction in 2025 is $15,000 for individuals and $30,000 for joint filers. The SALT deduction is capped at $10,000, so this limits your ability to itemize unless you have significant non-SALT deductions like mortgage interest or charitable contributions.

With the House-approved Trump tax plan, on the other hand, the standard deduction goes up slightly and the SALT deduction cap increases to $20,000 for individuals and $40,000 for joint filers. However, these SALT caps begin to phase down at $250,000 MAGI for individuals and $500,000 for joint filers, which can reduce your benefit as a higher-income taxpayer.

Under the Senate version of the Trump tax plan, the standard deduction remains aligned with the House proposal—$16,000 for individuals and $32,000 for joint filers—but the SALT deduction cap stays at $10,000 for most taxpayers. However, the Senate bill introduces a separate formula that allows higher deductions specifically for pass-through entity taxes (PTETs). This approach allows a deduction up to the greater of $40,000 or 50% of PTETs, after subtracting other SALT amounts. While this does not broadly raise the SALT cap like the House bill, it offers more targeted relief to business owners depending on their income structure and state tax rules.

Winners and Losers: Itemized Deductions Under the New Trump Plan

The Senate version of the Trump tax plan keeps the SALT deduction cap at $10,000 but allows a higher deduction for pass-through entity taxes using a separate formula. This provision may benefit business owners who file as partnerships or S corporations and pay state-level entity taxes. However, for most individual taxpayers, especially those in high-tax states, the SALT cap remains unchanged.

The House bill, by comparison, raised the SALT deduction cap to $40,000 for joint filers and $20,000 for single filers in 2025, with a phaseout beginning at $500,000 MAGI for joint filers and $250,000 for single filers.

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

Bottom Line

Itemizing could still make sense under the Senate bill if your deductions exceed the standard deduction, which remains higher under extended TCJA provisions. However, the Senate keeps the $10,000 SALT deduction cap in place for most individuals. Instead of raising the cap, it creates a separate formula allowing a larger deduction specifically for pass-through entity taxes. This benefits certain business owners but does not broadly increase the value of itemizing for high-income households in high-tax states. Unlike the House bill, the Senate does not introduce income-based phaseouts or a temporary SALT cap increase.

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.

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