United States

Standard or itemised deductions

Some taxpayers choose to itemise their deductions if their allowable itemised deductions total is greater than their standard deduction. Other taxpayers must itemise deductions because they aren't entitled to use the standard deduction. 

Instead of itemising deductions, citizens and resident aliens may claim a standard deduction. Pursuant to OBBBA, the basic standard deduction for 2025 is now USD 31,500 for married couples filing a joint return, USD 15,750 for single filers, and USD 23,625 for heads of household. These amounts are adjusted annually for inflation. Non-resident aliens may not claim a standard deduction. 

Individuals, including resident aliens, who are blind or age 65 or over are entitled to a higher standard deduction. For 2025, such an individual who is married may increase the standard deduction by USD 1,600; if such an individual is single, the additional standard deduction is USD 2,000. If an individual is both blind and age 65 or over, the standard deduction may be increased twice. 

OBBBA added a temporary ‘bonus’ senior deduction of USD 6,000 for a person that has attained age 65 before the end of the year for tax years 2025  through2028. The deduction has a phase-out that begins at a modified adjusted gross income of USD 150,00 for married filing jointly and USD 75,000 for all other taxpayers. 

For tax years after 2025, OBBBA also allows individuals to claim a USD 1,000 charitable deduction (USD 2,000 for a joint return) made to certain public charities if the individual does not itemize.  

If a taxpayer chooses to benefit from itemised deductions for the 2025 tax year, no general limitation applies, except for specific limitations on personal deductions such as mortgage interest, state and local taxes, personal casualty losses, medical expenses, and certain charitable donations (see discussion below).

For 2026 and beyond, OBBBA reinstated a modified version of the so-called ‘Pease’ limitation on a permanent basis. This new overarching limitation effectively reduces the tax benefit of otherwise allowable itemised deductions from 37% to 35% for taxpayers in the top income tax bracket (a formula is utilised.) This limitation applies to all itemised deductions, without a carveout for deductions such as medical expenses, investment interest expense, or charitable contributions (note that a slightly different ‘Pease’ limitation was in effect for tax years prior to 2018).

Employment expenses

Employees may not deduct certain 'ordinary and necessary' unreimbursed work-related expenses as an itemised deduction. This includes travel expenses and transportation costs, business entertainment and gifts, computers and cell phones if required for the taxpayer's job and for the convenience of the employer, uniforms, and home office expenses, among others. However, under the OBBBA, certain unreimbursed expenses of eligible educators may qualify for a deduction.

Prior law

Many of these expenses could potentially be deducted in tax years prior to 2018 as itemised expenses. However, P.L. 115-97 repealed various itemised deductions. For tax years before 2018, citizens, residents, and non-resident aliens generally were able to deduct expenses incurred for the following:

• Travel or personal living expenses (to the extent not reimbursed) while 'away from home' (see Employment income in the Income determination section for more information).
• Ordinary and necessary business expenses, including those for business (or employment) connected moving.
• Travel and entertainment expenses, subject to certain limitations. Note that the deductible amount for meals and entertainment expenses was limited to 50% of actual costs.

Employee business expenses were deductible only to the extent that, when added to other miscellaneous itemised deductions, they exceeded 2% of adjusted gross income. However, unreimbursed moving expenses were not subject to the 2% floor and were deductible in arriving at adjusted gross income. Reimbursements for moving expenses may have been eligible for exclusion from an employee's income; if reimbursement of moving expenses was excluded, then the expenses were not deductible by the employee.

Personal deductions

Citizens and resident aliens can deduct the following common items, subject to applicable limitations:

• Residence/home mortgage interest up to USD 750,000 of qualified indebtedness, permanently limited by OBBBA. Certain mortgage insurance premiums on acquisition debt may be treated as such interest.
• State and local (SALT) income or sales taxes and property taxes up to an aggregate of USD 40,000 (USD 20,000 for married filing separately) for the 2025 tax year. (The prior limitation was USD10,000 or USD 5,000 for married individuals filing separately.) This SALT cap is reduced by 30% of the taxpayer’s modified adjusted gross income over USD 500,000 (USD 250,00 for married filing separately), but not below USD 10,000 (USD 5,000 for married filing separately). This increased cap and phase-out thresholds increase by 1% annually from 2026 until 2029, at which point the SALT cap reverts back to USD 10,000 (USD 5,000 for married individuals filing separately) in 2030.
• Medical expenses, subject to a deduction floor of 7.5% of adjusted gross income.
• Charitable contributions, subject to various limitations set by OBBBA. For 2026, the Act imposes a floor equal to 0.5% of the taxpayer’s ‘contribution base’ (generally defined as adjusted gross income) for the year.  Contributions disallowed by the floor may be available as a carryover in subsequent tax years, but only if the taxpayer’s otherwise allowable contributions exceed the applicable adjusted gross income ceiling. The OBBBA also permanently extends the 60% limitation on cash contributions to public charities and donor advised funds, among other changes such as a new, nonrefundable income tax credit (rather than a deduction) for citizens and residents who make cash contributions to a scholarship granting organisation (limited to USD 1,700).
• Personal casualty and theft losses (other than ‘qualified disaster-related personal casualty losses’, discussed below), limited to losses attributable to a federally declared disaster area and subject to a USD 100 per casualty floor and aggregate threshold of 10% of an individual’s adjusted gross income. The OBBBA permanently extends this provision beyond 2025 and expands the deduction to include losses from a state declared disaster.
• Special rules also apply to ‘qualified disaster-related personal casualty losses’, which are deductible subject to a USD 500 floor but without regard to the 10% adjusted gross income limitation. Such losses may also be claimed even if the taxpayer does not itemize deductions. The OBBBA expanded the definition of qualified disaster-related personal casualty to include more recent natural disasters, potentially allowing more taxpayers to qualify for relief. 

Non-resident aliens may deduct, subject to limitations, casualty and theft losses incurred in the United States, certain contributions to US charitable organisations, and state and local income taxes.

Interest and alimony expenses

No deduction is allowed for personal interest. However, the OBBBA provides that ‘personal interest’ does not include qualified passenger vehicle loan interest for tax years 2025 through 2028, limited to USD 10,000.  

Personal interest also does not include interest paid on investment debt. Such interest is deductible but only to the extent that there is net investment income (i.e. investment income net of investment expenses other than interest). Disallowed excess investment interest expense may be claimed as a deduction in subsequent years, to the extent of net investment income. 

Alimony is not deductible (for divorces occurring after 31 December 2018).

Losses

Capital loss deduction

An individual's capital loss deduction is generally limited to the individual's capital gains plus USD 3,000.

Hobby loss

Losses incurred by individuals that are attributable to an activity not engaged in for profit (i.e. 'hobby losses') are generally deductible only to the extent of income produced by the activity. However, any allowable hobby loss deductions are categorised as miscellaneous itemised deductions. Since P.L. 115-97 temporarily disallowed miscellaneous itemised deductions for tax years 2018-2025, a provision that was made permanent by the OBBBA starting in 2026, hobby losses are effectively non-deductible under current law.

Non-corporate taxpayer loss limitations

Net operating loss (NOL) rules

For tax years beginning after 2021, individual taxpayers are eligible for:

• a 100% deduction of NOLs arising in tax years before 2018 and
• a deduction limited to 80% of taxable income for NOLs arising in tax years after 2017 with no ability to carry NOLs back to prior tax years.

Deferral of non-corporate taxpayer loss limits

Active net business losses attributable to trades or business (including losses from flow-through entities engaged in a trade or business) in excess of certain limits are disallowed and treated as NOL carryforwards in the following tax year under Section 461(l). For the 2025 tax year, the limit is USD 313,000 (USD 626,000 for joint filers). Net business losses in excess of these amounts will be disallowed on the 2025 return and will be carried forward as a net operating loss carryover to subsequent years..  

This excess business loss limitation rule applies for tax years after 2020 and pursuant to the OBBBA, is now permanent. The OBBBA also resets the allowable loss thresholds beginning in 2026 back to USD 250,000 (USD 500,000 for joint filers), but will be indexed for inflation going forward.   

Note that the CARES Act retroactively turned off the excess active business loss limitation rule of P.L. 115-97 in Section 461(l) by deferring its effective date to tax years beginning after 31 December 2020 (rather than 31 December 2017).