Common tax deductions for individuals and households

A tax deduction reduces the income amount you report to the IRS, which lowers the taxes you owe. The IRS allows you to deduct certain expenses and costs — you do not have to itemize every single one. Most people use either the standard deduction (a fixed amount that depends on your filing status and age) or itemized deductions (a list of specific expenses you add up yourself). You choose whichever gives you the larger total.

Common deductions include mortgage interest, state and local taxes (capped at $10,000 per year), charitable donations, medical expenses above a certain threshold, and student loan interest. Self-employed people can deduct business expenses like supplies, equipment, and home office costs. The rules change slightly each year, and what you can deduct depends on your situation — whether you own a home, run a business, have dependents, or paid for education.

Key Takeaways

  • You can deduct either the standard deduction (a fixed amount) or itemized deductions (your own list of expenses), whichever is larger.
  • Mortgage interest, property taxes, state income taxes, and charitable donations are among the most common itemized deductions.
  • Self-employed people can deduct business expenses, home office costs, and a portion of self-employment tax.
  • Medical expenses, student loan interest, and education costs may be deductible if they meet IRS thresholds and requirements.
  • Keeping receipts and records for any deduction you claim is essential — the IRS may ask you to prove the expense.

Itemized deductions: mortgage interest, taxes, and charitable giving

If you own a home, you can deduct the interest you pay on your mortgage (not the principal). This is one of the largest deductions for homeowners. You can also deduct property taxes you pay to your state or local government. Combined with state income tax, federal income tax, and sales tax, these are capped at $10,000 per year total — this limit applies whether you are single or married filing jointly.

Charitable donations to may have access to organizations (religious groups, nonprofits, schools, and hospitals) are deductible. You need a receipt or written acknowledgment from the charity for donations of $250 or more. Donations of items like clothing or furniture require you to list what you gave and estimate its fair market value. Keep records of all donations, including the date, the organization's name, and what you gave or how much you contributed.

Medical and dental expenses above the threshold

You can deduct medical and dental expenses, but only the amount that exceeds 7.5% of your adjusted gross income (AGI). If your AGI is $60,000, you can only deduct medical costs above $4,500. This threshold is high enough that most people do not benefit from this deduction unless they had major medical events, surgery, or ongoing treatment during the year.

Deductible medical expenses include doctor and dentist visits, prescription medications, glasses and contacts, hearing aids, and medical equipment like crutches or wheelchairs. You can also deduct the cost of health insurance premiums if you are self-employed. Keep receipts and bills from all healthcare providers, pharmacies, and medical suppliers.

Student loan interest and education costs

You can deduct up to $2,500 in student loan interest per year if you paid interest on a may have access to student loan and your income is below the IRS limit (which varies by filing status). This deduction does not require you to itemize — you can claim it even if you take the standard deduction. The loan must have been taken out for your education or your dependent's education, and you cannot claim this deduction if someone else claims you as a dependent.

Education costs like tuition and fees may be deductible through the American Opportunity Tax Credit or the Lifetime Learning Credit, though these are credits (which reduce your tax bill directly) rather than deductions. Costs for books, supplies, and room and board are generally not deductible unless you are pursuing a degree that leads to a new career and the education is work-related.

Self-employed business expenses and home office deductions

If you are self-employed, you can deduct ordinary and necessary business expenses. This includes supplies, equipment, software, professional services, advertising, and vehicle mileage for business travel. You keep a mileage log showing the date, destination, business purpose, and miles driven. The IRS sets a standard mileage rate each year (check the current rate on the IRS website).

A home office deduction is available if you use part of your home regularly and exclusively for business. You can use the simplified method ($5 per square foot, up to 300 square feet) or calculate actual expenses like rent, utilities, insurance, and repairs based on the percentage of your home used for business. You need to keep detailed records of all business expenses, including receipts, invoices, and mileage logs.

Investment losses and capital gains

If you sold stocks, real estate, or other investments at a loss, you can deduct up to $3,000 of capital losses against your ordinary income in a single year. Any losses above $3,000 carry forward to future years. If your capital gains (profits from selling investments) exceed your losses, the net gain is taxable income.

Investment expenses like brokerage fees and advisory fees are generally not deductible for most individual investors. However, if you are a professional trader or investor, different rules may explore. Keep records of the purchase price, sale price, and date for every investment you sell.

Retirement contributions and dependent care expenses

Contributions to a traditional IRA or SEP-IRA may be deductible, depending on your income and whether you have access to an employer retirement plan. Contributions to a 401(k) or similar workplace plan are usually deducted automatically from your paycheck before taxes. Self-employed people can deduct contributions to a Solo 401(k) or SEP-IRA up to certain limits set by the IRS each year.

If you paid for childcare or adult dependent care so you could work, you may be able to claim the Dependent Care Credit. Expenses must be for care of a child under 13 or a disabled dependent, and the care provider's name, address, and tax ID must be reported. Keep receipts and invoices from the daycare, nanny, or care facility.

What is not deductible

Personal expenses are not deductible — this includes groceries, rent (unless you are self-employed and it is a home office), car payments, gas for personal driving, clothing, and entertainment. Fines and penalties you pay to the government are not deductible. Cosmetic surgery and most over-the-counter medications are not deductible medical expenses.

Political contributions, lobbying expenses, and dues to labor unions are not deductible. Costs related to hobbies are not deductible unless the hobby generates income and you can show it is a legitimate business. Life insurance premiums are not deductible. If you are unsure whether an expense qualifies, the IRS website and Publication 17 (Your Federal Income Tax) provide detailed guidance.

Frequently Asked Questions

Should I itemize deductions or take the standard deduction?

Add up all your itemized deductions (mortgage interest, property taxes, charitable donations, and medical expenses above the threshold). If that total is larger than the standard deduction for your filing status, itemize. If it is smaller, take the standard deduction. Most people benefit from the standard deduction because it is simpler and the threshold is high.

Do I need receipts for every deduction I claim?

Yes. Keep receipts, invoices, bank statements, and written acknowledgments from charities. The IRS may ask you to prove any deduction you claim. For charitable donations of $250 or more, you must have a written receipt from the charity. For business expenses, keep detailed records including dates, amounts, and what the expense was for.

Can I deduct my home office if I work from home part-time?

Yes, if you use a specific room or area regularly and exclusively for business. You cannot deduct a bedroom you also sleep in or a kitchen table where you sometimes work. Use the simplified method ($5 per square foot) or calculate actual expenses based on the percentage of your home used for business. You must have a separate, dedicated workspace.

What if my income is too high to claim certain deductions?

Some deductions phase out at higher income levels — student loan interest, IRA contributions, and education credits all have income limits. Check the IRS website or Publication 17 for the current limits based on your filing status. If you exceed the limit, you cannot claim that deduction for that year.

Can I deduct losses from a side business or hobby?

Only if the activity is a legitimate business, not a hobby. The IRS looks at whether you operate it to make a profit, keep records, and have business experience. If you show a loss for three or more years out of five, the IRS may reclassify it as a hobby, and hobby losses are not deductible. Keep detailed records showing income and expenses.