Free Guide to Common Tax Deductions

Understanding the Basics: What Tax Deductions Actually Do

A tax deduction is an amount of money you can subtract from your taxable income before calculating what you owe in taxes. Here's the practical difference it makes: if you earn $50,000 and have $10,000 in deductions, you only pay taxes on $40,000. That $10,000 reduction means you're taxed on less money overall, which lowers your total tax bill.

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The IRS recognizes two main approaches to deducting expenses. The first is the standard deduction—a flat amount that changes every year based on inflation and your filing status. For 2024, the standard deduction ranges from $13,850 for single filers to $27,700 for married couples filing jointly. Most people take the standard deduction because it's simpler and often larger than what they could claim by itemizing.

The second approach is itemized deductions. Instead of taking one flat amount, you list out specific expenses throughout the year—mortgage interest, charitable donations, medical bills—and add them up. You only choose itemizing if your total exceeds the standard deduction for your situation. About 10% of tax filers itemize rather than take the standard deduction, according to IRS data.

Many people confuse deductions with tax credits, but they work differently. A $1,000 deduction reduces your taxable income by $1,000. A $1,000 credit reduces your actual tax bill by $1,000, making it more valuable. This guide focuses on deductions, but understanding the difference helps you recognize which tax benefits might apply to your situation.

Practical takeaway: Before claiming any specific deductions, calculate whether your standard deduction exceeds the sum of deductions you could itemize. Most filers benefit more from taking the standard deduction, so knowing this number prevents wasted effort tracking expenses that won't actually lower your taxes.

Employment-Related Deductions: What Working People Can Claim

If you're a W-2 employee—someone who receives a paycheck and has taxes withheld—your deduction options are limited. The Tax Cuts and Jobs Act of 2017 suspended most employee business expenses through 2025. This means you generally cannot deduct work supplies, uniforms, education related to your job, or unreimbursed travel expenses if you're a regular employee.

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However, certain occupations retain specific deductions. Military members can deduct moving expenses related to military orders, even if they're not reimbursed. Teachers can deduct up to $300 in classroom supplies they buy themselves—markers, books, software—without itemizing. This deduction has remained available even as other employee deductions disappeared. Performing artists, fee-basis government employees, and disabled employees with work-related impairment costs can also claim limited deductions, though these situations are less common.

If you're self-employed—whether you run a business, freelance, or work as an independent contractor—deductions look completely different. Self-employed people can deduct ordinary and necessary business expenses: office equipment, software subscriptions, internet service used for work, vehicle mileage (at 67 cents per mile for 2024), home office space, and supplies directly related to generating income. A freelance writer can deduct research materials and writing software. A plumber can deduct tools, vehicle expenses, and work uniforms.

One frequently overlooked deduction for self-employed individuals is the home office deduction. You can claim either $5 per square foot of dedicated workspace (up to 300 square feet) or calculate actual expenses—a portion of rent, utilities, and home maintenance based on the percentage of your home used for work. If you use one room exclusively for your business, you're likely eligible to deduct related costs.

The self-employment tax deduction allows you to deduct half of your self-employment tax liability, reducing the impact of having to pay both employee and employer portions of Social Security and Medicare taxes. For someone earning $60,000 in self-employment income, this deduction might reduce taxable income by $4,000 or more.

Practical takeaway: Regular employees should focus on the $300 teacher supply deduction or military-specific deductions rather than searching for non-existent employee business deductions. Self-employed people should maintain detailed records of all business expenses and mileage, as these deductions represent substantial tax savings—often reducing taxable income by 20-40%.

Home and Property Deductions: Mortgages, Taxes, and Maintenance

Homeownership creates multiple deduction opportunities, though recent tax law changes have reduced their value for some people. Mortgage interest remains one of the largest deductions available. You can deduct interest paid on up to $750,000 in mortgage debt (or $1 million on mortgages taken out before December 15, 2017). However, you must itemize deductions for this to matter—and most homeowners find the standard deduction larger.

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Property taxes paid on your home are deductible when you itemize, up to a $10,000 annual cap. This state and local tax (SALT) limit was introduced in 2017 and applies to all state and local taxes combined—including state income tax, property tax, and sales tax. In high-tax states like California, New York, and New Jersey, this cap significantly limits the value of the property tax deduction for high-income homeowners. Someone paying $15,000 in property taxes can only deduct $10,000 of that amount.

Home improvement expenses are generally not deductible. Replacing your roof, remodeling your kitchen, or installing new flooring cannot be written off as a current-year deduction. These costs become part of your "basis"—the amount you can subtract from your home's sale price to calculate capital gains when you eventually sell. Major repairs that restore your home to its original condition (as opposed to improvements that make it better) are also not currently deductible.

One exception exists: energy-efficient home improvements qualify for a federal tax credit (not a deduction) of up to $3,200. Installing solar panels, heat pumps, or certain HVAC systems, along with insulation and window upgrades meeting Department of Energy standards, can trigger this credit. The Inflation Reduction Act expanded these credits significantly starting in 2023, making them more valuable than they've been in years.

Points paid to obtain your mortgage can be deducted in some situations. If you paid points when refinancing or purchasing, and those points represent pre-paid interest, you may deduct them. However, the rules are complex—points on a primary residence purchase can typically be deducted in full, while points on a refinance must be deducted over the life of the loan.

Practical takeaway: Calculate your itemized deductions total (mortgage interest plus property taxes plus charitable donations plus medical expenses) before deciding to itemize. For most homeowners with a mortgage under $500,000 in a moderate-tax state, the standard deduction exceeds itemized deductions, making the mortgage interest deduction irrelevant. Don't let the idea of deducting mortgage interest drive your itemizing decision—run the actual numbers first.

Healthcare and Medical Expenses: Deductions for Costs Insurance Doesn't Cover

Medical expense deductions help people who face large healthcare costs, but the threshold is high. You can only deduct medical and dental expenses that exceed 7.5% of your adjusted gross income (AGI). If your AGI is $50,000, you can only deduct medical expenses above $3,750. This means most people with normal healthcare costs won't benefit from this deduction.

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The deduction includes obvious expenses: doctor and dentist visits, prescription medications, and hospital bills. It also covers less obvious costs. Therapy and psychiatric care are deductible. Medical equipment like crutches, wheelchairs, and hearing aids count. Laser eye surgery (LASIK) and orthodontics are deductible. Transportation to medical appointments—either mileage at 21 cents per mile or actual taxi/rideshare fares—qualifies. Health insurance premiums you pay yourself, including COBRA coverage between jobs, are deductible.

Some costs people assume are deductible actually aren't. Cosmetic surgery for appearance improvement (like a face lift or teeth whitening for cosmetic reasons) doesn't qualify. General health expenses like gym memberships or vitamins cannot be deducted, even