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WalletPrep worksheet · Taxes

Should you take the standard deduction or itemize?

Name ____________________ Date __________

Key ideas

  1. You take one, never both. The standard deduction or your itemized total, whichever is larger. Tax software usually checks both for you.
  2. State and local taxes are capped. Income or sales tax plus property tax count up to $40,400 in 2026, less at very high incomes.
  3. Some deductions work either way. Student loan interest, IRA contributions and the new tips, overtime and senior deductions don't require itemizing.

Vocabulary

Itemized deductions
Specific expenses, like mortgage interest, state and local taxes and charity, that you can list and subtract from income instead of taking the standard deduction.
Standard deduction
A flat amount the IRS lets you subtract from your income before tax is figured, if you do not itemize deductions.
SALT deduction
The itemized deduction for state and local income or sales taxes plus property taxes, limited to $40,400 for 2026.
Adjusted gross income
Your total income for the year minus a short list of adjustments, like deductible IRA contributions and student loan interest. Many tax rules and programs use it.
IRA
Individual retirement account: a tax-advantaged retirement account you open yourself at a bank or brokerage, separate from your job.
Self-employment tax
Social Security and Medicare tax for people who work for themselves. It is 15.3% on 92.35% of net profit, on top of income tax.

Work it out

Alex is single, earns $85,000 and owns a condo. This year Alex paid $10,200 in mortgage interest, $4,200 in state income tax, $3,100 in property tax and gave $1,500 in cash to charity.

  1. Mortgage interest
  2. State income tax
  3. Property tax
  4. Charity above 0.5% of AGI
  5. Itemized total
  6. Standard deduction
  7. Cash charity, non-itemizer
  8. Standard route total
  9. Tax saved by itemizing

Check yourself

  1. Your itemized deductions are $14,000 and you are single. What should you take?

    • A. The standard deduction
    • B. Itemized deductions
    • C. Both, added together
    • D. Neither

  2. You itemize $2,000 more than your standard deduction and your top bracket is 12%. How much tax does itemizing save?

    • A. $2,000
    • B. $1,200
    • C. $240
    • D. $120

  3. Which of these can you deduct without itemizing?

    • A. Mortgage interest
    • B. Property tax
    • C. State income tax
    • D. Student loan interest

Your turn

Find last year's mortgage interest statement, property tax bill and state tax total. Add them with your charity gifts and compare the sum with your standard deduction. Write the gap down so you know where you stand.

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Answer key

Should you take the standard deduction or itemize?

Work it out

  1. Mortgage interest$10,200
  2. State income tax$4,200
  3. Property tax$3,100
  4. Charity above 0.5% of AGI$1,075
  5. Itemized total= $18,575
  6. Standard deduction$16,100
  7. Cash charity, non-itemizer$1,000
  8. Standard route total= $17,100
  9. Tax saved by itemizing$324.50
  1. The charity floor is $85,000 × 0.5% = $425, so $1,500 − $425 = $1,075 counts. State and property taxes total $7,300, well under the SALT limit.
  2. Itemizing gives $10,200 + $4,200 + $3,100 + $1,075 = $18,575. The standard route gives $16,100 plus up to $1,000 of cash gifts, or $17,100.
  3. Itemizing wins by $18,575 − $17,100 = $1,475. Alex is in the 22% bracket, so it saves $1,475 × 22% = $324.50.

Check yourself

  1. A. The standard deduction The standard deduction for a single filer is $16,100 in 2026, which is more than $14,000. You take the bigger one.
  2. C. $240 $2,000 × 12% = $240. A deduction is worth the amount times your top tax rate.
  3. D. Student loan interest Student loan interest is an adjustment to income, so you get it with the standard deduction too. The other three are itemized deductions.