Need to Know Tax › Deductions, credits, and gains
Deductions, credits, and gains
Itemized vs. standard
Mortgage interest, state and local taxes, charitable gifts, and medical bills: what can be itemized, and how to tell whether itemizing beats the standard deduction. For most households it no longer does; for Colorado homeowners with a good income, the higher SALT cap put it back in play.
Every taxpayer gets to subtract one of two things from income before tax is figured: the standard deduction, a flat amount set by filing status, or the total of their itemized deductions, a list of specific expenses added up on Schedule A. You use whichever is larger. There is no advantage to itemizing for its own sake, and since the standard deduction was nearly doubled in 2018, most households take the flat amount and never see Schedule A. The 2025 law’s higher cap on state and local taxes moved some Colorado homeowners back across the line, which is why the comparison is worth running again this year.
| Filing status | Basic | Age-65 add-on | Both 65+ (joint) |
|---|---|---|---|
| Single | $16,100 | $2,050 | — |
| Head of household | $24,150 | $2,050 | — |
| Married filing jointly | $32,200 | $1,650 per spouse | $35,500 |
The add-on applies at 65 or if blind. The $6,000-per-person senior deduction for 2025 through 2028 comes on top of whichever choice is made, itemized or standard, so it does not enter the comparison. That is the bar itemizing has to clear.
What can be itemized
State and local taxes. Colorado income tax withheld or paid during the year, including last April’s balance due and the January estimated payment, plus property tax on your home and the ownership-tax portion of vehicle registration. The 2025 law raised the cap on this deduction from $10,000 to $40,000 for 2025 and $40,400 for 2026, rising 1% a year, with a phase-down for incomes over about $505,000 that bottoms out at the old $10,000. For a Colorado homeowner with a good income, this line alone can approach the standard deduction.
Mortgage interest. Interest on a loan used to buy, build or improve your main home or a second home, reported on Form 1098. The deduction is limited to interest on $750,000 of such debt for loans taken out after 2017 (verify); older loans keep the $1 million limit. Interest on a home equity loan counts only if the money went into the house. Mortgage insurance premiums are deductible again from 2026 (verify; the booklet’s pass-one draft said otherwise, and the 2025 law restored the deduction).
Charitable gifts. Cash and property given to qualified charities, with a receipt. From 2026 itemizers lose the first 0.5% of adjusted gross income of their gifts, and taxpayers in the top bracket get at most 35 cents of benefit per dollar. People who do not itemize get a separate deduction of up to $1,000 of cash gifts, $2,000 on a joint return, from 2026.
Medical expenses count only above 7.5% of adjusted gross income, which is a high bar unless the year included a nursing home, long-term care or large uninsured bills.
Gone since 2018, now permanently: unreimbursed employee expenses, tax preparation fees, investment fees, union dues and the other “miscellaneous” deductions; moving expenses except for the military; casualty losses outside a declared disaster.
Running the comparison
Worked example: the same house, two filing statuses
A home with $4,500 of property tax and $8,000 of mortgage interest; $9,000 of Colorado income tax paid; $6,000 of charitable gifts; AGI of $150,000.
| Married couple | Single homeowner | |
|---|---|---|
| State and local taxes (under the $40,400 cap) | $13,500 | $13,500 |
| Mortgage interest | $8,000 | $8,000 |
| Charitable gifts after the 0.5% floor ($750) | $5,250 | $5,250 |
| Total itemized | $26,750 | $26,750 |
| Standard deduction | $32,200 | $16,100 |
| Which wins | Standard, by $5,450 | Itemized, by $10,650 |
| What the $6,000 of gifts was worth | $2,000 on the non-itemizer line: $440 at 22% | $5,250 on Schedule A: $1,155 at 22% |
The same expenses, a different answer; it depends on the filing status, not the house. The couple would need more than $11,450 of gifts, after the floor, to beat the standard deduction. The single homeowner is already past the line before giving a dollar, so every gift counts.
When the total hovers near the line, timing is the tool. Paying January’s property tax installment and two years of charitable gifts in one December, then taking the standard deduction the next year, often beats itemizing a little every year. The couple above, giving $12,000 every second year instead of $6,000 every year, itemizes in the on year with $32,750 of deductions (barely over the line) and takes the $32,200 standard deduction in the off year, for $550 more deduction over two years; bunching three years’ gifts does better still. A donor-advised fund makes the timing invisible to the charities.
Behind the scenes
The software compares the two totals and picks the larger, but it only knows what was entered. A preparer asks for the property tax bill, the Form 1098, the Colorado tax paid with last year’s return, and the year-end charity statements before accepting the standard deduction. The Colorado estimated payment made in January, and last April’s balance due, are the state taxes most often left off Schedule A, and the vehicle ownership tax on the registration is the third. For a couple near the line, those three lines are often the difference.
The Colorado side
Colorado starts from federal taxable income, after whichever deduction you took, so itemizing lowers Colorado tax too, with one correction: if your itemized deductions included Colorado income tax, that part is added back on the Colorado return, since the state will not let you deduct its own tax from its own base. Property tax is not added back. For the single homeowner above, $9,000 of the $26,750 comes back into Colorado income, so the Colorado benefit of itemizing is on $17,750, not $26,750. Filers with AGI of $300,000 or more lose nearly the whole deduction for Colorado purposes under the addback described in Give it away, pay tax anyway. Non-itemizers can subtract charitable gifts above $500 on the Colorado return (verify).
What to bring your preparer
- Form 1098 from each mortgage lender, and the closing statement for a loan taken out or refinanced this year
- Property tax statements for your home, any second home, and vehicles (the ownership tax line on the registration)
- Colorado income tax paid during the year: withholding on W-2s and 1099s, estimated payments with dates, and the balance paid with last year’s return
- Year-end charitable statements and acknowledgments for gifts of $250 or more; a list of noncash donations
- Medical totals if the year was a large one, including Medicare and supplement premiums
- If you are near the line: next year’s expected gifts and property tax, so bunching can be planned
Questions people ask
We’ve taken the standard deduction since 2018. Should we look again?
Yes, if you own a home in Colorado and have a good income. The SALT cap quadrupled; a couple paying $12,000 of Colorado income tax and $5,000 of property tax now deducts all $17,000 instead of $10,000, and with mortgage interest and gifts may be over $32,200.
Is my home equity line deductible?
Only the interest on the part used to buy, build or improve the home. A HELOC used to pay off credit cards or buy a car is not deductible, however the bank labels it.
Can we split: one of us itemizes and the other takes the standard deduction?
Only on separate returns, and if one spouse itemizes the other must too; the standard deduction for the other is zero. Married filing separately almost never comes out ahead in Colorado.
Does the senior deduction count as itemizing?
No. It is a separate $6,000 per person (2025–2028) that applies on top of either the standard or itemized deduction, and the choice between those is made without it.
I itemized but my refund went down. Why?
Itemizing only helps by the amount it exceeds the standard deduction. If your total was $33,000 against a $32,200 standard deduction, the benefit was $800 of deduction, about $176 of tax. The paperwork is the same either way.
What else goes on Schedule A besides taxes, interest, charity and medical?
A short list. Gambling losses, up to gambling winnings, and starting in 2026 only 90% of losses count. Investment interest, up to net investment income. Casualty and theft losses from federally declared disasters. Starting in 2026, unreimbursed educator expenses, for teachers who itemize (the $300 above-the-line deduction remains for those who do not). Gone since 2018 and not coming back: unreimbursed employee expenses, tax preparation fees and investment advisory fees.
Bring the four documents and let the arithmetic decide
The property tax bill, the Form 1098, the Colorado tax paid with last year’s return, and the year-end charity statements. With those four in hand, the comparison takes a minute, and the answer changes from year to year.