Overview
Tax deductions reduce taxable income, lowering the amount of taxes owed. They can be standard or itemized, depending on eligibility and financial situation.
Standard Deduction for 2025
- Single Filers: $15,000
- Married Filing Jointly: $30,000
- Head of Household: $22,500
Common Itemized Deductions
*1. Medical & Dental Expenses*
- Deductible if expenses exceed 7.5% of adjusted gross income (AGI).
*2. State & Local Taxes (SALT)*
- Deduct up to $10,000 for state/local income, sales, and property taxes.
*3. Mortgage Interest Deduction*
- Applies to interest paid on mortgages up to $750,000.
*4. Charitable Contributions*
- Deduct donations to qualified organizations (limits apply based on AGI).
*5. Student Loan Interest Deduction*
- Up to $2,500 deduction for eligible student loan interest payments.
*6. Retirement Contributions*
- Traditional IRA contributions may be deductible (income limits apply).
*7. Home Office Deduction*
- Available for self-employed individuals using part of their home for business.
*8. Business Expenses*
- Deductible expenses include travel, equipment, and professional fees.
Tax Planning Strategies
- Maximize Deductions: Track eligible expenses throughout the year.
- Consider Itemizing: If deductions exceed the standard amount, itemizing may be beneficial.
- Stay Updated on IRS Changes: Deduction limits and eligibility may change annually.
Tools & Resources
- IRS tax calculators for estimating deductions.
- Tax planning software for optimizing deductions.
- Financial advisors for personalized tax strategies.