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I’m going to break down the three most frequently misunderstood concepts when it comes to the US tax code:

• Standard vs Itemized Deductions
• Marginal vs Effective Tax Rate
• Tax Deductions vs Credits </aside>

Table of Contents

Standard vs Itemized Deductions

Every taxpayer faces a choice: take the standard deduction or itemize. You cannot do both, and choosing correctly can mean thousands in tax savings.

Typically, your tax professional or the tax filing software you use makes this choice for you automatically!

Most Americans (close to ~90%) took the Standard Deduction last year in 2024.

The Standard Deduction

The standard deduction is a flat amount the IRS allows you to subtract from your income, no questions asked. No receipts, no documentation, no hassle.

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2025 Standard Deduction Amounts:

• Single/Married Filing Separately: $15,750
• Head of Household: $23,625
• Married Filing Jointly: $31,500

Additional Amounts for 65+:

• Single/Head of Household: +$2,000
• Married (per spouse): +$1,600

Plus OBBB Senior Bonus (2025-2028):

• Up to $6,000 extra if income under $75,000 (single) or $150,000 (married) </aside>

Itemized Deductions

Itemizing means adding up specific expenses the IRS allows and deducting the total. More work, potentially more savings.

Most Common Itemized Deductions:

State and Local Taxes (SALT):

• Property taxes
• State income or sales taxes
• Cap: $40,000 (increased from $10,000 by OBBB)