Beginner’s Guide to Tax Deductions You May Be Missing
Tax deductions are one of the best ways to reduce your taxable income and keep more of what you earn. However, many people overlook common deductions simply because they don’t know they qualify.
This guide breaks down the basics of tax deductions, the difference between standard and itemized deductions, and several commonly missed deductions you might be eligible for.
1. What Are Tax Deductions?
A tax deduction reduces your taxable income, which means you pay less in taxes. Unlike tax credits (which reduce your tax bill directly), deductions lower the amount of income that’s subject to tax.
Example:
If you earn $50,000 and claim $5,000 in deductions, your taxable income is $45,000.
2. Standard vs. Itemized Deductions
✅ Standard Deduction (2023):
Most taxpayers take the standard deduction, which is a fixed amount based on your filing status:
- Single or Married Filing Separately: $13,850
- Married Filing Jointly: $27,700
- Head of Household: $20,800
✅ Itemized Deductions:
If your itemized deductions add up to more than the standard deduction, it’s worth itemizing. These include expenses like mortgage interest, property taxes, and medical costs.
3. Commonly Missed Tax Deductions
Even if you take the standard deduction, some above-the-line deductions (now called “adjustments to income”) may still apply.
🔹 1. Student Loan Interest
- Deduct up to $2,500 in interest paid on qualified student loans
- You don’t need to itemize to claim this
🔹 2. Educator Expenses
- Teachers and eligible school employees can deduct up to $300 (or $600 for married teachers) for classroom supplies
🔹 3. Retirement Contributions
- Contributions to a traditional IRA may be tax-deductible
- Self-employed? Contributions to SEP IRAs or Solo 401(k)s can also be deducted
🔹 4. Health Savings Account (HSA) Contributions
- If you have a high-deductible health plan, you can deduct contributions to your HSA—even if you don’t itemize
🔹 5. Self-Employment Expenses
Freelancers, gig workers, and small business owners may deduct:
- Home office expenses
- Internet and phone bills
- Business mileage
- Office supplies and software
- Professional development
🔹 6. Job Search Expenses (Note: no longer deductible for most people after tax law changes, but may return in the future or apply to certain professionals)
🔹 7. Charitable Contributions
- If you itemize, you can deduct donations of money, goods, or mileage driven for charitable work
- Keep proper receipts and documentation
🔹 8. Medical and Dental Expenses
- If you itemize, you can deduct unreimbursed expenses that exceed 7.5% of your adjusted gross income (AGI)
🔹 9. State and Local Taxes (SALT)
- Deduct up to $10,000 in combined property, state, and local income or sales taxes (if itemizing)
🔹 10. Mortgage Interest
- Deduct interest on up to $750,000 of mortgage debt (if you itemize)
4. Above-the-Line Deductions (No Itemizing Needed)
These deductions reduce your adjusted gross income (AGI) and may qualify you for additional credits or benefits.
Examples:
- Student loan interest
- HSA contributions
- Traditional IRA contributions
- Self-employed health insurance premiums
- Tuition and fees (if eligible)
5. How to Claim Deductions
- Use IRS Form 1040 and the appropriate schedules or attachments
- Tax software like TurboTax, H&R Block, or FreeTaxUSA can walk you through claiming them
- Keep receipts, statements, and records for proof in case of an audit
6. Tips to Maximize Your Deductions
- Track expenses throughout the year (use a spreadsheet or app)
- Bundle charitable donations into one year to exceed the standard deduction
- Don’t forget about mileage and business use of your car
- If self-employed, hire a tax professional or learn to use Schedule C properly
- Check for education and childcare credits that may also apply
Final Thoughts
Tax deductions can save you hundreds—or even thousands—of dollars each year. By learning what you qualify for and keeping solid records, you can maximize your benefits and reduce your tax bill with confidence.
Let me know if you’d like a printable deductions checklist, an expense tracker template, or help deciding if you should itemize or take the standard deduction!