With the standard deduction now significantly increased under OBBBA, many taxpayers, and even some tax preparers are skipping over one of the most powerful tools for reducing taxable income: itemized deductions.
What Are Itemized Deductions
Itemized deductions are specific expenses the IRS lets you subtract from your income to lower your taxable income. Instead of taking the flat standard deduction, you list ("itemize") each deductible expense.
Important clarification for business owners: There's a common misconception among taxpayers, especially LLC owners, partners, and S corporation shareholders, that itemized deductions don't apply to them. That's not true.
Even if you own a pass-through business, the income flows through to you personally, and you are taxed as an individual. That means you're subject to the same rules as any other taxpayer. Whether you have a business or not, you are responsible for tracking and choosing the deduction method that best reduces your taxable income.
What Do You Itemize
You don't just itemize anything. The IRS provides a specific list of qualifying expenses:
- Mortgage interest - Interest paid on mortgages for your primary residence and a second home
- Charitable contributions - Donations to qualified charitable organizations
- Qualified medical expenses - Expenses exceeding 7.5% of your Adjusted Gross Income (AGI)
- State and local taxes (SALT) or Sales taxes - Up to the applicable cap ($40,000 under OBBBA)
- Casualty and theft losses - But only in federally declared disaster areas
- Investment interest expense - Limited to your net investment income
Tax Implication of Itemizing Deductions
If your total itemized deductions are higher than the standard deduction, you will save more by itemizing, because the IRS allows you to use whichever is higher. Under OBBBA, the 2025 standard deduction is:
| Filing Status | Standard Deduction (2025) |
|---|---|
| Single Filers | $15,750 |
| Married Filing Jointly | $31,500 |
| Seniors (Age 65+) | $21,750 (Single) / $43,500 (Joint) |
Example Scenario
If you're filing jointly and your itemized deductions total $40,500, you'll reduce your taxable income by $9,000 more than the standard deduction, potentially saving thousands in taxes.
Calculation: $40,500 (Itemized) - $31,500 (Standard) = $9,000 additional deduction
Why Itemized Deductions Are Often Overlooked
Many tax preparers default to standard deduction because:
- It is faster and requires less paperwork - Standard deduction is a simple calculation
- Itemizing requires substantiation - You need proper documentation for each deduction
Precision Over Convenience
But simplicity isn't always strategy. At TripleH CPA PLLC, we believe in precision over convenience, especially when it means real tax savings. We:
- Review every client's profile for itemization potential
- Educate clients on what qualifies for itemizing and how to document it
- Calculate both options to ensure you're using the most beneficial approach