How to Lower Taxes with the Standard Deduction

The standard deduction is the simplest way to reduce your taxable income. It offers a straightforward tax break for millions. However, its simplicity can be misleading. Simply taking it as a default option without much thought often means you're leaving money on the table. A strategic approach can turn this basic deduction into a strong tool for multi-year tax planning.

This article shows you how to think past the basics. We'll cover the mechanics of the standard deduction versus itemizing and explain the "bunching" strategy. This technique helps you maximize your tax savings by planning your deductions across several years.

What is the Standard Deduction? A Quick Refresher

The standard deduction is a specific dollar amount, set by Congress, that you can subtract from your adjusted gross income (AGI) to lower your taxable income. It was created to simplify tax filing and offer a baseline tax benefit without requiring filers to track and report every deductible expense.

Your standard deduction amount depends primarily on your filing status. The IRS adjusts these figures annually for inflation. For the 2024 tax year (the return you file in 2025), the standard deduction amounts are:

• Married Filing Jointly & Surviving Spouses: $29,200
• Single: $14,600
• Married Filing Separately: $14,600
• Head of Household: $21,900

You may also qualify for a higher standard deduction if you or your spouse meet certain age or blindness criteria. For 2024, the additional amounts are:

• 1,550 for taxpayers who are married filing jointly, surviving spouses, or married filing separately and are either age 65 or older _or_ blind. This amount increases to 3,100 if a taxpayer is both 65 or older and blind. These increases apply for each spouse who meets the criteria.
• 1,950 for single or head of household taxpayers who are age 65 or older _or_ blind. This increases to 3,900 if they are both 65 or older and blind.

For example, a married couple filing jointly where both spouses are over 65 would have a standard deduction of 29,200 + 1,550 + 1,550, for a total of 32,300.

Standard vs. Itemized: The Basic Choice

Every taxpayer chooses between taking the standard deduction or itemizing. You cannot do both. You pick the option that results in a larger total deduction, which lowers your taxable income the most.

Itemized deductions are specific, eligible expenses listed on Schedule A of Form 1040. If your total itemized deductions are greater than your available standard deduction, you should itemize. Common itemized deductions include:

• State and Local Taxes (SALT): This includes state income, sales, and property taxes paid during the year. The Tax Cuts and Jobs Act (TCJA) limited this deduction to a combined total of $10,000 per household per year.
• Home Mortgage Interest: You can usually deduct interest paid on mortgage debt used to buy, build, or substantially improve your primary home and a second home.
• Charitable Contributions: Donations to qualified charitable organizations are deductible. For cash contributions, the general limit is 60% of your AGI. Donating highly appreciated stock from a brokerage account offers significant tax benefits. Learn more about charity tax deductions from the IRS. This link will send you to the official IRS website.
• Medical and Dental Expenses: This deduction is hard to claim because you can only deduct the amount of medical expenses that exceeds 7.5% of your AGI.

Let's look at an example. A married couple has an AGI of $150,000. Their potential itemized deductions for the year are:

• State and local property and income taxes: $10,000 (at the SALT cap)
• Home mortgage interest: $11,000
• Charitable donations: $4,000

Their total itemized deductions are 25,000. Their standard deduction for married couples filing jointly is 29,200. Since 29,200 is greater than 25,000, they would choose the standard deduction to get the larger tax benefit.

A Smart Strategy: Bunching Itemized Deductions

Many taxpayers find themselves in a situation similar to the couple above-their annual itemized deductions are consistently close to, but just under, the standard deduction amount. By taking the standard deduction year after year, they miss out on the value of their itemized expenses.

"Bunching" is a tax planning strategy that addresses this. It involves timing discretionary deductible expenses-concentrating them into a single tax year to exceed the standard deduction threshold for that year. In the other years, you claim the standard deduction.

This approach lets you get the full benefit of itemizing in one year and still use the generous standard deduction in another, increasing your total deductions over a two-year period.

Let's revisit our married couple with 25,000 in typical annual itemized deductions (10,000 SALT, 11,000 mortgage interest, 4,000 charity). Their MFJ standard deduction is $29,200.

• Scenario 1 (No Planning): They take the standard deduction in both Year 1 and Year 2.

  • Year 1 Deduction: $29,200
  • Year 2 Deduction: $29,200
  • Total deductions over two years: $58,400

• Scenario 2 (Bunching Strategy): The couple decides to bunch their charitable contributions.

  • In Year 1 (The "Itemizing" Year): In December, they make their planned 4,000 donation for Year 1 _and_ their anticipated 4,000 donation for Year 2.
    • SALT: $10,000
    • Mortgage Interest: $11,000
    • Charitable Donations: 8,000 (4,000 for Year 1 + $4,000 for Year 2)
    • Total Itemized Deduction for Year 1: $29,000
  • In Year 2 (The "Standard" Year): They make no charitable donations.
    • SALT: $10,000
    • Mortgage Interest: $11,000
    • Total Itemized would be 21,000. This is lower than the standard of 29,200, so they claim the standard deduction.
    • Total Standard Deduction for Year 2: $29,200

Let's assess the outcome:

• Total deductions with bunching: 29,000 (Year 1) + 29,200 (Year 2) = $58,200

This result is slightly lower because our example uses very clean numbers. Let's adjust slightly: If their mortgage interest was 13,000 annually, their Year 1 total would be 31,000 instead. Total two-year deductions would become 31,000 + 29,200 = $60,200, which makes the point clearer. The success of this strategy depends entirely on your potential itemized expenses compared to the standard deduction.

How to Effectively Bunch Your Deductions

Effective bunching relies on controlling the timing of certain deductible payments. Some expenses are easier to shift than others.

Charitable Contributions

This is the most flexible category for bunching. You can easily make two years' worth of donations in a single year. A Donor-Advised Fund (DAF) is an excellent tool for this. You can contribute a large sum to the DAF in one year to get a significant itemized charitable deduction. Then, you can advise the fund to distribute grants to your chosen charities over the next several years. This gives you an upfront tax break while still supporting non-profits over time.

Medical and Dental Expenses

Timing medical expenses is less predictable but possible for elective procedures. If you expect significant medical bills, you can try scheduling non-urgent procedures, dental work, or purchases like prescription glasses or hearing aids in the same year to help clear the 7.5% AGI hurdle. However, this is significantly less effective as an active tax planning tactic compared to other forms of bunching.

State and Local Taxes (SALT)

Before TCJA greatly increased the standard deduction, many accountants thought TCJA made this form of bunching less appealing due to the $10,000 annual cap on SALT deductions. In reality, TCJA's limitation of SALT deductions is a separate issue from the benefits that bunching provides as part of a long-term tax optimization plan. Where possible, you can still get modest economic wins through SALT-focused bunching.

The easiest tax payments to bunch are your fourth-quarter state estimated tax payments (due in January) and real estate property taxes that may be due early in the following year. Paying both of these early, in December, pulls that deduction into the current tax year. The $10,000 cap limits the value of this move, but it can provide the margin you need to efficiently itemize.

Important Considerations and State-Level Differences

Before using a bunching strategy, consider a few other factors.

First, always consider state tax laws. Many states have their own rules for standard and itemized deductions that don't match federal law. An action that benefits you federally might not have the same effect on your state return, or vice versa.

Second, remember that excellent record-keeping is essential. Even if you plan to take the standard deduction one year, you must keep detailed records of all potential itemized expenses. This is the only way to accurately determine if bunching is a viable strategy for you in the coming year and to properly execute the plan when the time is right.

Final Thoughts

Simply defaulting to the standard deduction can be a missed opportunity. For taxpayers whose itemized expenses regularly fall just short of the threshold, a bunching strategy lets them maximize tax benefits over several years by thoughtfully alternating between itemizing and taking the standard deduction.

A proactive tax strategy like bunching requires quick and accurate information, especially when dealing with state tax rules or a client's specific financial situation. When complex questions arise, Feather AI provides instant, citation-backed answers from IRS guidance and state tax codes. This allows you to spend less time on manual research and more time giving high-value strategic advice to your staff and clients.