Why Taking the Standard Deduction Costs High Earners $10K or More Annually
A higher income on its own doesn’t necessarily mean you should itemize your deductions — but it does mean you should run the numbers.
Before the Tax Cuts and Jobs Act of 2017, which effectively doubled the standard deduction, fully 31% of Americans itemized their deductions. Since then, only 10% of taxpayers itemize according to the Tax Policy Center.
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Yes, it’s more work tracking all those expenses and receipts. But it can often save higher earners $10,000 to $20,000 on their tax bills. Of course, going the standard deduction would forego these savings. Here's why just taking the standard deduction can cost high earners over $10,000.
Greater Earnings, Greater Opportunities To Deduct
In 2026, the standard deduction is $16,100 ($32,200 for married couples) and $24,150 for heads of household.
A family earning $40,000 a year simply won’t have $32,200 in deductible expenses. But a family earning $400,000 a year? That’s a different story.
High earners also pay higher marginal tax rates on their income. That makes deductions more valuable, saving them more money on their tax bill. A taxpayer who can write off an extra $10,000 above the standard deduction by itemizing can save themselves $3,200 if that income falls in the 32% bracket, compared with $2,200 if that income would otherwise be taxed at 22%.
Potential Deductions
High earners should run the numbers for their mortgage interest, state and local taxes (SALT, which include income taxes and property taxes), charitable contributions and qualified medical expenses.
Homeowners with high-value houses often benefit the most from itemizing. The higher your mortgage and property taxes, the more you can potentially save on taxes by itemizing.
In particular, homeowners in high-tax states and cities might see huge savings by itemizing SALT deductions. “For 2026, the SALT deduction cap temporarily increased to $40,400, though it begins to phase down for modified gross incomes above $500,000 (bottoming out at $10,000 around $600,000 AGI),” explained accountant Joel Salas with JustAnswer. “When you combine state taxes with mortgage interest, many high-earning households easily clear the $32,200 baseline of the standard deduction.”
High earners have a higher floor to clear however to deduct medical expenses. They can only deduct medical bills exceeding 7.5% of their adjusted gross income. For a family earning $400,000, that means they can only deduct medical expenses that exceed $30,000.
Example of Tax Savings
Salas painted a simple example of how the tax savings can quickly exceed the standard deduction for high earners. “A married couple with $40,000 in SALT, $20,000 in mortgage interest and $6,400 in charitable contributions would total $66,400 in itemized deductions," he said. "That’s $34,200 more than the $32,200 joint standard deduction. If they are in the 32% marginal tax bracket, itemizing saves them roughly $10,944 in taxes versus the standard deduction.”
As touched on above, where you live matters, as does renting versus owning your home. The tax code favors homeowners, despite their relative wealth compared to renters at large.
Realtor and certified public accountant (CPA) Anthony Guerriero works with clients in both New York and Florida through Manhattan Miami Real Estate and has seen the numbers work both ways. “A $400,000 earner who rents in Miami and gives little to charity often still takes the standard deduction. A $250,000 earner with a Manhattan co-op, a mortgage and New York State and City income tax withheld all year should usually itemize.”
It’s worth mentioning that you don’t need to itemize to deduct work-related expenses if you’re self-employed. Those count as business expenses, which you can deduct from your business income while still taking the standard deduction.
When in doubt about itemizing, run the numbers — ideally with the help of an accountant or tax strategist.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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