Itemized vs. Standard Deduction: What’s Better?

by Cynthia R.

Taxes seem to follow us everywhere.

Buy something from the store? Sales tax. Purchase a home? Property tax. Book a weekend at the beach? Hotel tax. And of course, with every paycheck, there’s federal income tax, state tax (depending on where you live), Social Security, Medicare, and other withholdings.

The good news is that when tax season rolls around, you may have options to reduce your tax bill and keep more money in your pocket. One of the biggest decisions many taxpayers face is whether to take the standard deduction or itemize deductions.

In this guide, we’ll walk you through both options and explain what’s changed under the One Big Beautiful Bill Act.

What Is the Standard Deduction?

The standard deduction is a fixed dollar amount you can deduct from your taxable income. It’s adjusted yearly for inflation and is a flat reduction from your adjusted gross income to determine your taxable income.

The amount for which you may qualify depends on your filing status (single, married, head of household, etc). Additional benefits apply if you’re 65 or older or visually impaired.

Since you don’t have to keep track of expenses, nearly 90% of taxpayers take the standard deduction because it’s the simplest and quickest option. Check the guidelines listed on the IRS website to ensure you qualify to take the standard deduction.

What Does It Mean to Itemize?

Itemizing requires you to keep track of your eligible, deductible expenses and subtract that total from your adjusted gross income. You must have the proper IRS-approved documentation that reports this total, such as receipts or statements.

Some examples of deductible expenses include:

Out-of-pocket medical bills
Acknowledgement letters from charitable organizations
Tax documents of mortgage interest
Personal property taxes

Unlike the standard deduction, the amount when you itemize isn’t fixed, as it depends on your actual expenses. This option is worth it for taxpayers whose total amount of allowable itemized deductions is more than the standard deduction. See the instructions for Schedule A (Form 1040) and follow IRS guidelines on limits and qualifications.

person doing taxes

Standard Deduction vs. Itemized Deductions: How to Decide

The easiest way to decide whether to take the standard deduction or itemize is to run the numbers both ways and see which gives you the bigger deduction.

To itemize, you need to keep track of what you spent throughout the year on deductible expenses and add up the total amount. If it’s less than the standard deduction, take the standard deduction. If it’s more than the standard deduction, itemize.

Here are a couple of common scenarios to consider:

Homeowners with a mortgage often benefit from itemizing because of payments towards mortgage interest and property taxes.
Renters often stick with the standard deduction unless they have large medical bills or significant charitable contributions.

self-employed woman doing taxes

What Self-Employed People Should Know

Being self-employed comes with many perks. However, it also comes with extra tax responsibilities as you’re responsible for paying them yourself.

If you earn more than $400 in net earnings (income minus expenses), you must file an annual tax return using Form 1040 or Form 1040-SR. You’ll also need to make estimated quarterly tax payments to cover both income tax and the 15.3% self-employment tax, which includes Social Security and Medicare.

The best approach is to set aside part of every payment you receive. For example, if you earn $40,000 in net profit and expect to owe about 25% in taxes, plan to pay around $2,500 each quarter for the $10,000 tax responsibility.

Luckily, self-employed workers can claim valuable deductions such as business advertising, education, health insurance premiums, home office costs, and work-related travel. Be sure to keep good records and receipts.

How the One Big Beautiful Bill Act Changed the Rules

On July 4, 2025, the U.S. Congress passed the One Big Beautiful Bill Act, which made significant updates for tax years 2025 through 2028:

Standard deduction amounts were permanently increased.
Taxpayers 65 and older can now deduct an additional $6,000 per eligible individual.
Annual inflation adjustments still apply, so deduction amounts will rise slightly each tax year.

Because the IRS will continue to adjust the standard deduction amounts to keep up with inflation, it’s strongly recommended to review your expenses each tax year to decide whether taking the standard deduction or itemizing is right for you.

earned income tax credit document

Tax Credits That Can Lower Your Bill Even More

Whether you take the standard deduction or itemize, tax credits can reduce your bill dollar-for-dollar. A few common ones include:

Credits are powerful because they reduce the amount of tax you owe directly, not just your taxable income. For example, let’s say you owe $2,500 in taxes but qualify for a $1,000 Earned Income Tax Credit. Your tax bill drops to $1,500 regardless of your deduction choice.

person visiting ACE Cash Express

How ACE Can Help During Tax Season

Increase the Accuracy of Your Return

ACE Cash Express has a Tax Program where tax professionals can register to become members. If they qualify, they will be listed on a portal as a potential resource. You can search by zip code to connect with a tax preparer near you.¹ They can assist you with your return, run the numbers, and help you decide whether to itemize deductions or take the standard deduction.

Get Ready for Electronic Tax Refunds

With limited exceptions, the U.S. Treasury Department will not issue federal 2025 tax refunds by check, as mandated by Executive Order. Going forward, most federal tax refunds will be sent electronically. If you are due a refund, ACE can help you access that tax refund faster by getting you set up with a direct deposit account.²

Access Your Tax Refund Quickly

With a direct deposit account² set up at ACE, your refund can be deposited electronically and accessed as soon as it hits your account. We can also cash your government or non-government tax refund check at an ACE store near you.³ All you need is your tax refund check and a valid, government-issued photo ID.

If you need to withdraw cash from a tax debit card, ACE has cash on hand to serve you, even if it’s a large amount.³ The minimum withdrawal amount is $5.00.⁴

woman doing her taxes

If you’ve been asking yourself, “Should I itemize or take the standard deduction?”, the answer ultimately depends on your personal situation. For many, the standard deduction is quicker and easier. But if your eligible expenses are high enough, itemizing could save you more. Either way, understanding your options is the first step toward a smoother tax season.

This blog is not intended to provide any tax, legal, financial planning, insurance, accounting, investment, or any other kind of professional advice or services. To make sure that any information or suggestions in this blog fit your particular circumstances, you should consult with an appropriate tax or legal professional before taking action based on any suggestions or information that we provide.

SOURCES

DISCLAIMERS

ACE Cash Express does not endorse the quality of service or qualifications of any tax professional. Tax preparation is not a service that ACE Cash Express offers.
Faster access claim is based on comparison of a disbursement via direct deposit vs. disbursement via a mailed paper check. For up-to-date information from the IRS, visit www.irs.gov/refunds.
Terms and conditions apply. Digital copy of identification may not be accepted. All checks subject to approval.
Withdrawals may be subject to limits imposed by your card.

Should I Take the Standard Deduction or Itemize?