Commonly Used Tax Deductions
February 10, 2025Income taxes are one of our largest expenses. They can also become one of our biggest financial planning stressors. While you can’t avoid paying taxes, you can try to minimize the total amount of income taxes that you owe. By paying less in taxes, you’ll have more money to save for your goals. The good news is that you can use popular tax deductions to help reduce your tax bill.
How income tax deductions work for you
Taxpayers can choose between the standard deduction, a fixed amount that reduces income automatically, or itemized deductions, which allow you to deduct specific expenses like mortgage interest, property taxes, and medical costs. The key is to determine which option provides the greatest tax savings, helping you keep more of your money to put toward your financial goals.
Standard Deduction 2024 (Returns Due April 2025)
| Filing Status | 2024 Standard Deduction |
|---|---|
| Single | $14,600 |
| Married Filing Jointly | $29,200 |
| Qualified Widow(er) | $29,200 |
| Married Filing Separately | $14,600 |
| Head of Household | $21,900 |
Standard Deduction 2025 (Returns Due April 2026)
| Filing Status | 2025 Standard Deduction |
|---|---|
| Single | $15,000 |
| Married Filing Jointly | $30,000 |
| Qualified Widow(er) | $30,000 |
| Married Filing Separately | $15,000 |
| Head of Household | $22,500 |
Additional Considerations:
- The standard deduction is higher for those over 65 or blind, and even higher if you meet those conditions and your filing status is Single or Head of Household.
- If your tax filing status is Married Filing Separately and your spouse itemizes deductions, you may not claim the standard deduction. If one spouse itemizes income tax deductions, then the other spouse must itemize to claim any deductions.
- Non-resident aliens must itemize deductions on their tax returns as they are not eligible to claim the standard deduction.
Most commonly used tax deductions
Here are some of the most commonly used tax deductions you may be eligible to use when attempting to minimize your taxes:
Mortgage interest deduction – Homeowners can deduct their mortgage interest (subject to mortgage limits) on Schedule A of Form 1040. The limit for mortgage debt is dependent on when you took out the loan. For loans taken out on or before December 15, 2017, you can deduct home mortgage interest on up to $1,000,000 ($500,000 if you are married filing separately) of that debt. For loans taken after December 15, 2017, you can only deduct home mortgage interest on up to $750,000 ($375,000 if you are married filing separately) of that debt. No matter when the mortgage debt was incurred, you cannot deduct the interest from a loan secured by your home to the extent the loan proceeds were used for purposes other than to buy, build, or improve your home.
State and local taxes (SALT) – You can also deduct up to $10,000 of state, local, and property taxes (or sales and property taxes if you don’t live in a state with income taxes). This is an aggregate limit and is $5,000 for married couples filing separately. The so-called “SALT limitations” underscore the importance of limiting state and local taxes as much as possible.
Examples of state and local taxes that can be itemized on a tax return include the following:
- Withholding for state and local income taxes as shown on Form W-2 or Form 1099.
- Personal property taxes
- Real estate taxes
- Estimated tax payments you made during the year
- Payments made during the year for taxes that arose in a previous year
- Extension tax payments you made during the year
Charitable donations – The IRS agrees that it is better to give than to receive, and they offer some helpful tax savings for giving (if you itemized deductions). There are deductions available for cash and household items donated to charities.
For charitable contributions to be deductible, they must have been made to qualified organizations. Contributions to individuals are never deductible. You may determine if the organization you contributed to qualifies as a charitable organization for income tax deduction purposes by referring to the IRS Tax Exempt Organization Search tool. For more information, see Publication 526, Charitable Contributions and Can I Deduct My Charitable Contributions?
Less frequent itemized deductions
Medical and dental expenses – You can deduct medical and dental expenses if they exceed 7.5% of your Adjusted Gross Income.
Moving expenses – If you are an active-duty member of the military and are required to move due to a military order, you may be eligible to deduct certain moving expenses associated with your relocation.
Home equity loan interest – Home equity loan interest is deductible to the extent loan proceeds were used to buy, build, or make significant improvements to the home. Interest attributed to loan amounts not used for these purposes is not deductible.
Casualty losses due to a disaster – You may be eligible to deduct casualty losses if they occurred due to an event officially declared a federal disaster.
Take Action
If you are not sure which deduction to claim, complete an estimate of your itemized deductions using Schedule A. If your itemized deductions exceed the standard deduction amount for your filing status, you will want to itemize. If you are using the standard deduction amount, you can focus your tax planning efforts on reducing or deferring your taxable income.