How to Find Deductions for Your Taxes

A tax deduction is an expense the Internal Revenue Service (IRS) allows a taxpayer to subtract from their gross income. This reduces an individual’s taxable income, which lowers the amount of tax they are obligated to pay. Deductions lower the income figure upon which tax is calculated, not the final tax bill on a dollar-for-dollar basis.

The tax code provides for many deductions, each with its own rules. The process involves identifying which expenses qualify and then reporting them on the appropriate tax forms. This ensures you are not paying tax on income that was used for specific, allowable purposes.

The Standard vs. Itemized Deduction Decision

When preparing a tax return, a taxpayer must choose between taking the standard deduction or itemizing deductions. The standard deduction is a fixed dollar amount, adjusted annually for inflation, that you can subtract from your income. This amount varies based on your filing status, age, and whether you or your spouse are blind.

For the 2025 tax year, the standard deduction for a single individual or someone married filing separately is $15,000. For a head of household, the amount is $22,500, and for married couples filing a joint return or qualifying surviving spouses, it is $30,000. An additional amount is available for taxpayers who are age 65 or older or blind; for 2025, this is $2,000 for single or head of household filers and $1,600 for married filers.

Itemizing involves tallying up all individual, eligible expenses on Schedule A of Form 1040, such as mortgage interest, certain taxes, charitable gifts, and medical expenses. If the total of your itemizable expenses is greater than the standard deduction for your filing status, you will be better off itemizing. For example, a married couple with $32,000 in itemized deductions would itemize because that is larger than their $30,000 standard deduction.

Common Itemized Deductions

Taxpayers who itemize list their deductions on Schedule A. If the total of these expenses exceeds your standard deduction, it is beneficial to itemize. Common itemized deductions include:

• Mortgage Interest: You can deduct the interest paid on a loan used to buy, build, or improve your primary or secondary residence. For mortgages taken out after December 15, 2017, interest on up to $750,000 of mortgage debt is deductible. For mortgages that originated before this date, the limit is $1 million in mortgage debt. Your lender will send you Form 1098, which reports the amount of interest you paid.
• State and Local Taxes (SALT): You can deduct certain state and local taxes, including income taxes or, alternatively, sales taxes. This category also includes real estate and personal property taxes. The total amount you can deduct for all state and local taxes combined is capped at $10,000 per household per year, or $5,000 if married filing separately.
• Charitable Contributions: Donations made to qualified charitable organizations can be deducted. This includes cash and the fair market value of donated property. You can deduct cash contributions up to 60% of your adjusted gross income (AGI), while the limit for property is 30% of AGI. Any single contribution of $250 or more requires a written acknowledgment from the charity.
• Medical and Dental Expenses: You can deduct unreimbursed medical and dental expenses for yourself, your spouse, and your dependents, but only the amount that exceeds 7.5% of your AGI. If your AGI is $100,000, you can only deduct medical expenses over $7,500. Qualifying expenses include payments to doctors, prescription costs, necessary medical equipment, and health insurance premiums paid with after-tax dollars.

Key “Above-the-Line” Deductions

Above-the-line deductions are subtracted from your gross income to calculate your adjusted gross income (AGI). You can claim them on Schedule 1 of Form 1040 even if you take the standard deduction. Because they lower your AGI, they can also help you qualify for other tax benefits with income limitations.

• Traditional IRA Contributions: Contributions to a traditional Individual Retirement Account (IRA) are often deductible. If you are not covered by a retirement plan at work, your full contribution is deductible up to the annual limit. For 2025, the contribution limit is $7,000, or $8,000 if you are age 50 or older. If you have a workplace retirement plan, your ability to deduct contributions may be limited based on your modified AGI.
• Student Loan Interest Deduction: Taxpayers who paid interest on a qualified student loan may deduct the amount paid, up to a maximum of $2,500. This deduction is subject to income limitations, which may reduce or eliminate it for those with higher modified adjusted gross incomes. You should receive Form 1098-E from your lender if you paid $600 or more in interest.
• Health Savings Account (HSA) Contributions: If you have a high-deductible health plan, you can make tax-deductible contributions to a Health Savings Account (HSA). For 2025, the maximum contribution is $4,300 for self-only coverage and $8,550 for family coverage. Individuals age 55 or older can contribute an additional $1,000. Contributions you make yourself with post-tax money are deductible, but employer contributions are not.
• One-half of Self-Employment Tax: Self-employed individuals pay both the employee and employer portions of Social Security and Medicare taxes, known as the self-employment tax, at a total rate of 15.3%. The tax code allows you to deduct one-half of what you pay in self-employment taxes. This deduction directly reduces your AGI.

Deductions for the Self-Employed and Small Businesses

Self-employed individuals or sole proprietors report income and expenses on Schedule C of Form 1040. This allows for the deduction of business expenses that are both ordinary and necessary for the business. These deductions are subtracted from business revenue to determine net profit or loss.

Home Office Deduction

If you use a portion of your home regularly and exclusively for business, you may deduct related expenses. The simplified method allows a standard deduction of $5 per square foot of office space, up to 300 square feet. The actual expense method involves calculating the percentage of your home used for business and deducting that portion of actual home expenses, like mortgage interest, insurance, and utilities.

Qualified Business Income (QBI) Deduction

Many owners of pass-through businesses, such as sole proprietorships, may be eligible for the Qualified Business Income (QBI) deduction. This allows for a deduction of up to 20% of qualified business income. The QBI deduction is complex, with rules based on taxable income and business type, and is calculated on Form 8995 after determining AGI.

Business Use of a Vehicle

When using your personal vehicle for business, you can deduct the costs using one of two methods. For 2025, the standard mileage rate is 70 cents per mile driven for business. The actual expense method requires tracking all car-related costs and deducting the percentage of those costs corresponding to your business use.

Other Common Expenses

Self-employed individuals can deduct a variety of other costs associated with their business, including:

• The cost of supplies
• Business-related travel expenses
• Premiums for business insurance policies like liability or malpractice
• Health insurance premiums for yourself, your spouse, and dependents
• Business meals with clients, which can be deducted at 50% of the actual cost

Strategies for Uncovering and Documenting Deductions

The responsibility to prove an expense is deductible rests with the taxpayer. Proper documentation is necessary to substantiate your claims in the event of an IRS audit.

A primary strategy is to maintain separate financial accounts for business activities. Using a dedicated business bank account and credit card creates a clear record of income and expenses, which simplifies record-keeping. This separation makes it easier to identify deductible spending when filing your taxes.

You should implement a system for organizing receipts and other documentation, which can be physical or digital. For each expense, the documentation should show the amount, date, place, and business purpose. For deductions like vehicle use, a mileage log is required, tracking the date, mileage, and purpose of each business trip.

Reviewing your prior-year tax returns can help uncover deductions. This can remind you of recurring deductions, like property taxes or retirement contributions. It can also highlight deductions you may have missed, prompting you to claim them in the current year if eligible.