Schedule A (Form 1040) is where you list itemized deductions instead of taking the standard deduction: medical and dental costs above 7.5% of your AGI, state and local taxes, home mortgage interest, gifts to charity and a few others. For 2025 the state and local tax (SALT) cap rose to $40,000 ($20,000 if married filing separately), as of October 2026, which makes itemizing worth a fresh look for many households.
The basic test hasn't changed: your federal income tax is usually lower if you take whichever is larger, your itemized deductions or your standard deduction. What has changed for 2025 is the size of one of the biggest itemized lines. Everything here comes from the IRS 2025 instructions for Schedule A.
What's new for 2025
- SALT cap increased to $40,000 ($20,000 married filing separately). It's reduced if your modified AGI is above $500,000 ($250,000 married filing separately), but never below $10,000 ($5,000 married filing separately).
- Four new deductions (no tax on tips, no tax on overtime, no tax on car loan interest and the enhanced deduction for seniors) go on the new Schedule 1-A, not Schedule A. You can claim them even if you itemize.
How the SALT phase-down works
The IRS worksheet for line 5e does it in a few steps:
- Work out your modified AGI on the worksheet.
- If it's more than $500,000 ($250,000 married filing separately), subtract that threshold.
- Multiply the excess by 30%.
- Take that from the $40,000 cap ($20,000 married filing separately).
- Your cap is the larger of that result or $10,000 ($5,000 married filing separately).
So the bigger cap only helps in full below the threshold, and it shrinks back toward the old $10,000 figure as income rises. You can deduct state and local income tax or general sales tax, not both, plus property taxes, all inside the one cap.
The main deductions on Schedule A
| Section | The rule to know (2025 instructions) |
|---|---|
| Medical and dental | Only the part above 7.5% of your AGI (Form 1040, line 11b) counts |
| Taxes you paid | State and local income or sales tax plus property taxes, up to the SALT cap above |
| Home mortgage interest | Interest on up to $750,000 of home debt ($375,000 married filing separately); older debt can use the earlier $1,000,000 ($500,000) limit |
| Gifts to charity | Religious, charitable, educational, scientific or literary organizations; see Pub. 526 if cash gifts are more than 30% of your AGI |
| Casualty and theft losses | Generally only losses from a federally declared disaster, figured on Form 4684 |
| Other itemized deductions | A short list, including gambling losses up to the gambling winnings you report |
Dollar limits in this table are as of October 2026. Non-cash gifts may need extra paperwork; our guide to Form 8283 covers when that applies.
Mortgage interest and property tax details
Two dates decide your mortgage limit. For home debt taken out on or before December 15, 2017, interest is deductible on up to $1,000,000 ($500,000 married filing separately). For debt taken out after that date, the limit is $750,000 ($375,000), and it's reduced by any older debt still under the higher limit. Line 8a takes the interest and points your lender reports on Form 1098, unless one of those limits cuts it down, in which case Pub. 936 does the maths.
Property taxes need a closer look at the bill. Personal property tax only counts if it's based on value alone and charged yearly. The IRS example is a car registration fee that's partly based on the car's value and partly on its weight: you can deduct only the value-based part. Real estate bills often carry charges for services like trash collection, and those aren't deductible taxes.
Income tax or sales tax?
You choose one. If you elect sales tax instead of income tax, the instructions let you use the IRS optional sales tax tables plus sales tax on specified items, and sales tax on a leased car counts too. Sales tax on a vehicle at a rate above the general rate is limited to the general rate. Whichever you pick, it shares the one SALT cap with your property taxes. If a sales tax refund comes back the following year, the treatment depends on whether it reduced your deduction, so keep the paperwork.
Want AI doing the heavy lifting in your marketing?
I build the systems that handle the boring 80 percent, so you get your week back. Done properly, with the human kept in.
Things people get wrong
- Deducting the same cost twice. The instructions are clear: don't include anything already deducted on Form 1040, Schedule 1-A or Schedules C, E or F. If you're self-employed, business costs belong on Schedule C, not here.
- Counting all medical bills. Only the slice above 7.5% of AGI is deductible, and HSA distributions follow their own rules in Pub. 969.
- Assuming the new deductions need itemizing. Tips, overtime, car loan interest and the seniors deduction go on Schedule 1-A either way.
- Ignoring line 18. If you choose to itemize for state tax or other reasons even though itemizing is smaller than your standard deduction, you check the box on line 18.
Should you itemize?
Add up the lines above using your real figures, then compare the total with your standard deduction. Couples filing separately should read Pub. 504 for how to split joint expenses, and if you paid expenses jointly but file separately, the split matters. Keep receipts, property tax bills and your mortgage lender's year-end statement with your records.
The verdict
If you live in a high-tax state, own a home with a mortgage and give to charity, the 2025 SALT increase may tip you from the standard deduction into itemizing for the first time in years. Run both numbers, and watch the $500,000 phase-down if your income is high. If you're nowhere near the standard deduction, don't spend an evening on Schedule A.
Frequently asked questions
What is the SALT deduction limit for 2025?
$40,000, or $20,000 if married filing separately, reduced above $500,000 of modified AGI but never below $10,000 ($5,000 married filing separately).
Can I deduct all my medical expenses on Schedule A?
No. You can deduct only the part of medical and dental expenses above 7.5% of your adjusted gross income.
Do I need Schedule A to claim no tax on tips or overtime?
No. Those deductions go on Schedule 1-A, and you can claim them whether or not you itemize.
How much mortgage interest can I deduct?
Interest on up to $750,000 of home mortgage debt ($375,000 if married filing separately), with a higher limit for some older debt.
