Tax season can bring a mix of stress and anticipation, but understanding which deductions you’re eligible for can alleviate some of that burden. Whether you’re single or married, maximizing your deductions can help lower your tax bill and potentially increase your refund. Here’s a comprehensive guide to the top 20 most common and popular tax deductions for individuals in 2023.
Understanding Tax Deductions for Individuals
Knowing which deductions you can claim can save you money and ensure you’re making the most of the tax benefits available. Let’s dive into the top 20 tax deductions you should be aware of.
1. Standard Deduction 2024
The 2024 tax standard deduction is $14,600 for single filers, $29,200 for joint fillers, and $21,900 for heads of household. People 65 or older may be eligible for a higher amount. The 2024 standard deduction is taken on tax returns filed in 2025.
| Filing Status | 2024 Standard Deduction Amount |
|---|---|
| Single or Married Filing Separately | $14,600 |
| Married Filing Jointly or Qualifying Surviving Spouse | $29,200 |
| Head of Household | $21,900 |
Source: Internal Revenue Service
Should I use the Standard Deduction? The standard deduction is straightforward, but if your itemized deductions exceed these amounts, you might benefit more from itemizing.
2. Mortgage Interest
Homeowners can deduct the interest paid on mortgages for their primary residence and a second home. For mortgages taken out after December 15, 2017, the deduction is limited to interest on up to $750,000 of mortgage debt ($375,000 if married filing separately). Additionally, mortgage insurance premiums and points paid on the mortgage may also be deductible under certain conditions.
How to Claim Mortgage Interest Expenses Keep detailed records of your mortgage interest payments and any related documentation. Be on the lookout for Form 1098, which should be provided to you by your mortgage lender.
3. State and Local Taxes (SALT)
You can deduct either state and local income taxes or sales taxes (but not both). The deduction is capped at $10,000 per year ($5,000 for married individuals filing separately). This cap includes property taxes, which is particularly beneficial for homeowners.
How to Document SALT Deductions Keep records of all state and local tax payments, including property tax statements. You can also see tax payment history on your county property records website.
4. Charitable Contributions
Donations to qualifying charitable organizations are deductible, including cash donations and the fair market value of donated goods.
How to Track Donations Maintain detailed records and receipts for all charitable contributions. Obtaining a letter regarding details of your contribution from a qualified charitable organization is important to have for your records.
5. Medical and Dental Expenses
Unreimbursed medical and dental expenses that exceed 7.5% of your adjusted gross income (AGI) are deductible. Eligible expenses include doctor visits, hospital stays, prescription medications, and certain long-term care services.
How to Track Medical Expenses Keep a comprehensive record of all medical costs throughout the year. This includes medical bills, receipts, invoices, letters, and other related documentation. You should also save your payment confirmations, credit card, and bank statements indicating the payments were made.
6. Student Loan Interest
Interest paid on qualified student loans is deductible up to $2,500 per year. This deduction is subject to income limits: $70,000 to $85,000 for single filers and $140,000 to $170,000 for married couples filing jointly.
How to Claim Student Loan Interest Ensure you have accurate records of the interest paid on your student loans. A summary of the interest paid should be provided to you by your institution on Form 1098-E.
7. Education Expenses
While education-related expenses are often covered by credits like the American Opportunity Credit, some deductions are still available. For example, the tuition and fees deduction, if extended by Congress, allows you to deduct up to $4,000 in tuition and fees.
How to Deduct Education Expenses Confirm if the tuition and fees deduction is available each tax year. These tax laws can change from year to year so consult with a CPA for the best advice.
8. Retirement Contributions
Contributions to traditional IRAs are deductible, with limits of $6,500 per year ($7,500 if you’re 50 or older). For 401(k)s, the contribution limit is $22,500 for individuals under 50 and $30,000 for those 50 and older. These contributions reduce your taxable income and boost your retirement savings.
How to Document Contributions Maintain records of your IRA and 401(k) contributions, which will be outlined on your retirement tax forms, such as Form 5498.
9. Health Savings Account (HSA) Contributions
Contributions to an HSA are tax-deductible and can be used for qualified medical expenses without tax on withdrawals. For 2023, contribution limits are $3,850 for individuals and $7,750 for families. Individuals 55 and older can contribute an additional $1,000.
How to Claim HSA Contributions Track all HSA contributions and withdrawals to ensure they are used for qualified expenses, such as copays, dental cleanings, eye exams, etc.
10. Self-Employment Expenses
If you’re self-employed, you can deduct business-related expenses such as office supplies, travel, and home office costs. The home office deduction applies if you use part of your home exclusively and regularly for business.
How to Record Self-Employment Expenses Keep detailed records of all business expenses, including invoices and receipts. If your business deals with many transactions, consider tracking them on Excel or QuickBooks.
11. Home Office Deduction
For self-employed individuals or remote workers, you can claim a home office deduction. Choose between the simplified method ($5 per square foot up to 300 square feet) or the actual expense method, where you deduct a percentage of your home expenses based on business use.
How to Track Home Office Expenses Document your home office space and related expenses by taking measurements of your home office square footage, and detailed records on your home expenses that you also use for business.
12. Job Search Expenses
Job search expenses related to your current occupation, including resume preparation and employment agency fees, were deductible. However, the Tax Cuts and Jobs Act of 2017 largely eliminated this deduction except in specific cases.
How to Document Job Search Costs Keep records of all job search-related expenses and receipts.
13. Casualty and Theft Losses
Losses from casualties (e.g., natural disasters) and thefts not covered by insurance are deductible, subject to a $100 per event deductible and a 10% AGI limit.
How to Track Losses Document all losses and insurance reimbursements carefully. Keep in mind this deduction is limited.
14. Unreimbursed Employee Expenses
Generally, unreimbursed employee expenses are not deductible under the Tax Cuts and Jobs Act. However, teachers and educators can deduct up to $300 of classroom supplies purchased out of pocket.
How to Claim Educator Expenses Keep receipts and records of classroom supplies purchases.
15. Adoption Expenses
Qualified adoption expenses, including fees, legal costs, and travel, are deductible up to certain limits. The adoption credit offers up to $15,950 per child in 2023, with phase-outs based on income.
How to Document Adoption Costs Maintain detailed records of all adoption-related expenses, such as moving costs, adoption fees, travel expenses, etc.
16. Alimony Payments
For divorce decrees finalized before 2019, alimony payments are deductible by the payer. This does not apply to divorces finalized after December 31, 2018.
How to Track Alimony Payments Keep records of all alimony payments made under pre-2019 divorce decrees.
17. Rental Property Deductions
Expenses related to managing and maintaining rental property are deductible, including repairs, property management fees, and a portion of mortgage interest. Depreciation on the property is also deductible over 27.5 years.
How to Document Rental Property Expenses Keep detailed records of all rental property expenses, such as interest, supplies, repairs, bank charges, etc. Using Excel is a great way to keep track of these expenses monthly. QuickBooks is also an option for rentals with many transactions.
18. Tax Preparation Fees
Most taxpayers cannot deduct tax preparation fees due to changes under the Tax Cuts and Jobs Act. However, business owners or those who itemize deductions may deduct some preparation fees as a business expense.
How to Track Preparation Costs Maintain records of any tax preparation fees if applicable.
19. Investment Interest Expense
Interest on loans used to invest in taxable securities is deductible up to the amount of net investment income. This does not apply to loans used to purchase tax-exempt securities.
How to Document Investment Interest Expenses Keep detailed records of interest paid on investment loans. Look for the investment interest paid on your 1099-B for more information.
20. Qualified Business Income Deduction
The Qualified Business Income (QBI) deduction allows self-employed individuals and owners of pass-through entities (e.g., partnerships, S-corporations) to deduct up to 20% of qualified business income. This deduction is subject to income limits and other eligibility criteria.
How to Claim QBI Ensure you meet the eligibility criteria and keep detailed records of your business income and deductions.
Conclusion
Understanding and utilizing these top tax deductions for individuals can significantly impact your tax return, potentially saving you money and maximizing your refund. Tax laws are complex and can change frequently, so it’s wise to consult with a tax professional to ensure you’re taking full advantage of all eligible deductions and staying compliant with current regulations. With the right preparation and knowledge, you can approach tax season with confidence.
Note that the information in this post is good through the 2023 tax year. Tax laws can change from year to year, so stay tuned for future updates!
