The IRS offers two major options for lowering your taxable income. The "standard deduction" and "itemized deductions".
The standard deduction is a fixed amount that you can deduct from your income to reduce how much is taxed. You can take the standard deduction without having to prove anything. Last year, over 90% of taxpayers used the standard deduction in computing their tax. The standard deduction is a flat amount that is allowed even though the individual has not necessarily paid such amount. For 2025, the standard deduction is a whopping $31,500 for married couples ($34,700 if both 65 or over) filing a joint return. And, for 2025 only, a "bonus" $6,000 per taxpayer can be added to that standard deduction (provided certain income thresholds are met).
Itemized deductions include, but are not limited to, items such as medical expenses (only those greater than 7 1/2% of your adjusted gross income are allowed), state, local & real estate taxes, known as SALT (up to $40,000 MAX effective for 2025 tax returns), mortgage interest (can be reduced depending on mortgage amount), PMI and qualified charitible contributions.
Most people find that the standard deduction is much larger than the total of their itemized deductions. However, with the increase in the 2025 SALT deduction to $40,000 (max) from $10,000 some taxpayers may find that their 2025 itemized deductions are greater than the 2025 standard deduction.
