Key takeaways

• A tax deduction lowers your taxable income, which can reduce your overall tax bill based on your tax bracket.
• Taxpayers can claim the standard deduction or itemize expenses — whichever gives the bigger reduction.
• Tax credits cut your tax bill dollar for dollar, potentially delivering bigger savings.

What is a tax deduction?

A tax deduction is an amount that reduces your total taxable income by allowing you to deduct certain expenses, lowering the overall tax you owe.

There is one main standard deduction, which is available for most taxpayers and allows you to deduct varying amounts based on filing status. For the 2025 tax year, the standard deduction is $15,750 for single or married filing separately, $31,500 for married filing jointly, and $23,625 for heads of household.

Taxpayers can also choose to itemize their deductions — tallying a variety of eligible expenses, subject to certain limits — if their total deductions exceed the standard deduction amount.

Tax deductions generally fall into two categories: above-the-line and below-the-line deductions. Above-the-line deductions reduce your adjusted gross income (AGI) and are available whether you itemize or take the standard deduction, while below-the-line deductions are itemized deductions that reduce your taxable income after your AGI is calculated.

Tax deductions for 2025 and 2026 tax years

Deductions you can take on top of the standard deduction

Sometimes called “above-the-line” deductions, these deductions reduce your adjusted gross income (AGI) and can be taken whether you take the standard deduction or itemize. The limits and income thresholds below reflect rules for the 2025 and 2026 tax years, as applicable. Be sure to confirm final IRS guidance for your filing year.

Retirement contributions

• What it covers: Contributions to certain pre-tax retirement accounts, including traditional IRAs and self-employed plans like SEP IRAs, SIMPLE IRAs, and the employer contribution portion of a solo 401(k).
• Who qualifies: Taxpayers contributing to eligible retirement accounts. Your deduction may be limited if you (or your spouse) are covered by a retirement plan at work and your income exceeds certain levels.¹
• Itemizing required? No
• 2025 max deduction: Traditional IRA: $7,000 ($8,000 if age 50+); SEP IRA: Up to 25% of compensation, maximum $69,000; SIMPLE IRA: $16,000 ($19,500 if age 50+); solo 401(k): Employer contribution up to 25% of compensation.
• 2026 max deduction: Traditional IRA: $7,000 ($8,000 if age 50+); SEP IRA: Up to 25% of compensation, maximum $69,000; SIMPLE IRA: $16,000 ($19,500 if age 50+); solo 401(k): Employer contribution up to 25% of compensation.

Student loan interest

• What it covers: Interest paid on qualified federal and private student loans for you, your spouse, or a dependent.²
• Who qualifies: Taxpayers paying qualified student loan interest (income phase-outs apply).
• Itemizing required? No
• 2025 and 2026 max deduction: $2,500³
• 2025 phase-out (MAGI): $85,000–$100,000 (single); $170,000–$200,000 (married filing jointly); not available if married filing separately.⁴
• 2026 phase-out (MAGI): Not yet issued by the IRS.

Self-employment expenses

• What it covers: Ordinary and necessary business expenses such as supplies, software, travel, and equipment.⁵
• Who qualifies: Self-employed individuals.
• Itemizing required? No
• 2025 and 2026 max deduction: No cap

Home office deduction

• What it covers: The business-use portion of home expenses for self-employed workers. W-2 employees working from home are not eligible.⁶
• Who qualifies: Self-employed taxpayers using part of their home exclusively and regularly for business.
• Itemizing required? No
• 2025 and 2026 max deduction: Simplified method: $5 per square foot, up to 300 square feet (maximum $1,500); regular method: Based on business-use percentage.

HSA contributions

• What it covers: After-tax contributions to a health savings account (HSA).⁷
• Who qualifies: Taxpayers enrolled in a qualified high-deductible health plan.
• Itemizing required? No
• 2025 max deduction: Deductions vary by coverage. Self-only coverage: $4,300; family coverage: $8,550; additional $1,000 if age 55 or older.
• 2026 max deduction: Self-only coverage: $4,400; family coverage: $8,750; additional $1,000 if age 55 or older.⁸

Alimony paid (pre-2019 agreements only)

• What it covers: Court-ordered alimony payments under qualifying divorce agreements finalized before 2019.
• Who qualifies: Taxpayers paying qualifying alimony under pre-2019 agreements.
• Itemizing required? No
• 2025 and 2026 max deduction: Amount paid.⁹

Educator expenses

• What it covers: Educator expenses include out-of-pocket classroom supplies and materials, as well as professional development courses or supplies.
• Who qualifies: Educators who worked as a K-12 teacher, instructor, counselor, principal, or aide for at least 900 hours during the school year.
• Itemizing required? No
• 2025 max deduction: $300 per educator or $600 if married filing jointly and both spouses are educators.¹⁰
• 2026 max deduction: $350 per educator or $700 if married filing jointly and both spouses are educators.¹¹

Charitable donations (for non-itemizers starting in 2026)

• What it covers: Cash contributions made to qualified charitable organizations. Property donations do not qualify.
• Who qualifies: Taxpayers who claim the standard deduction and make qualified contributions.
• Itemizing required? No
• 2025 max deduction: Not available.
• 2026 max deduction: $1,000 (single); $2,000 (married filing jointly).¹²

Below-the-line deductions that require itemizing

Sometimes called “below-the-line” deductions, these deductions reduce your taxable income after your adjusted gross income (AGI) is calculated. They are only available to taxpayers who itemize their deductions. Itemizing is beneficial only if the total of all your itemized deductions exceeds the standard deduction available for your filing status. Some common deductions available to those who itemize include:

Charitable contributions (itemizers)

• What it covers: Cash or property donations made to qualified charitable organizations.
• Who qualifies: Taxpayers who itemize deductions.
• Itemize required? Yes
• 2025 max deduction: Generally, up to 60% of adjusted gross income (AGI) for cash contributions. Noncash (property) donations are generally limited to 50% of AGI, reduced by any cash contributions counted toward the 60% limit.
• 2026 max deduction: Generally, up to 60% of AGI for cash contributions, but you cannot claim a deduction for charitable contributions equal to 0.5% of your AGI. The 50% AGI limit for noncash (property) donations still applies.^13,14

Mortgage interest

• What it covers: Interest you pay on a mortgage for your main home or one second home, as long as the loan was used to buy, build, or improve the home. Mortgage interest for investment properties is a separate deduction using the Schedule E form.^15,16
• Who qualifies: Homeowners with a mortgage secured by their home.
• Itemize required? Yes
• 2025 and 2026 max deduction: Interest on up to $750,000 of mortgage debt ($375,000 if married filing separately). If you got your mortgage before December 16, 2017, you may qualify for a higher deduction limit.¹⁷

State and local taxes (SALT)

• What it covers: State income taxes, sales taxes, and property taxes paid by taxpayers.¹⁸
• Who qualifies: Taxpayers paying eligible state and local taxes.
• Itemize required? Yes
• 2025 SALT deduction cap: $40,000 ($20,000 if married filing separately)
• 2026 SALT deduction cap: $40,400 ($20,200 if married filing separately)¹⁹

Medical expenses

• What it covers: Unreimbursed medical, dental, and certain long-term care expenses paid for by the taxpayer that exceed 7.5% of AGI.
• Who qualifies: Taxpayers with significant out-of-pocket medical costs.
• Itemize required? Yes
• 2025 and 2026 max deduction: No maximum.²⁰

Below-the-line deductions available without itemizing

These are also below-the-line deductions, meaning they reduce your taxable income after AGI is calculated. However, unlike itemized deductions, they are available even if you claim the standard deduction.

Tips deduction

• What it covers: Qualified tip income received and reported.
• Who qualifies: Eligible tipped workers (not available for married filing separately). The “no tax on tips” deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).
• Itemize required? No
• 2026 max deduction: Up to $25,000 per return.²¹

Overtime deduction

• What it covers: Compensation from overtime that exceeds the regular rate of pay, for example .
• Who qualifies: Eligible taxpayers with qualified overtime pay. Deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).
• Itemize required? No
• 2026 max deduction: $12,500 for single filers; $25,000 for those married filing jointly.²²

Car loan interest deduction

• What it covers: Interest paid on a loan for a new personal-use passenger vehicle.
• Who qualifies: Taxpayers with qualified auto loans meeting eligibility requirements. The deduction phases out for taxpayers with incomes over $100,000 ($200,000 for married filing jointly).
• Itemize required? No
• 2025 and 2026 max deduction: Up to $10,000 in annual interest paid on a qualified new vehicle loan for personal use.²³

Enhanced senior deduction

• What it covers: An additional deduction for taxpayers age 65 or older for tax years 2025 to 2028.
• Who qualifies: Taxpayers age 65 or older on or before the last day of the tax year. Deduction phases out for taxpayers with modified adjusted gross income over $75,000 ($150,000 for joint filers).
• Itemize required? No
• 2025 and 2026 max deduction: $6,000 per eligible taxpayer; $12,000 for married filing jointly if both spouses qualify.²⁴

Tax credits vs. tax deductions

If you’re wondering what the difference is between tax deductions and tax credits, here’s a simple way to make the distinction.²⁵ Tax deductions and tax credits are both valuable tools for tax savings but they work differently: a tax deduction reduces the amount of taxable income, while a tax credit can reduce the amount of tax due. With tax deductions, savings depend on your marginal tax rate. So, a filer in the 22% bracket could save $220 through a $1,000 deduction.

Note: Several deductions described reflect changes enacted under the One, Big, Beautiful Bill Act and apply beginning with the 2025 or 2026 tax year, as noted. Taxpayers should confirm final IRS guidance before filing. Tax laws are complex and subject to change. Consult a qualified tax professional regarding your specific situation.