Deductions (Tax Deduction)

📂 Types of Tax Deductions

1. Standard Deduction

A set dollar amount that reduces the income you’re taxed on.
Most people take the standard deduction because it’s easy and often larger than itemizing.

2025 Standard Deduction Amounts
(Amounts can change slightly each year)

• Single: $14,600
• Married Filing Jointly: $29,200
• Head of Household: $21,900

Extra amounts may apply if you are age 65 or older or blind.

2. Itemized Deductions

Instead of the standard deduction, you can list certain expenses if they add up to more than the standard deduction.

Common itemized deductions include:

• Medical and dental expenses (only the amount over 7.5% of AGI)
• State and local taxes (SALT) — limited to $10,000
• Mortgage interest
• Charitable donations
• Casualty or theft losses (from federally declared disasters)

Itemized deductions are reported on Schedule A.

3. Above‑the‑Line Deductions

These deductions lower your Adjusted Gross Income (AGI) and can be taken even if you use the standard deduction.

Common examples:

• Educator expenses
• Student loan interest
• Traditional IRA contributions
• Deductible part of self‑employment tax
• Health Savings Account (HSA) contributions

These are reported directly on Form 1040.

📉 How Deductions Affect Your Taxes

• Gross Income
  → subtract Above‑the‑Line Deductions
  → get AGI
• AGI
  → subtract Standard or Itemized Deduction
  → get Taxable Income
• Taxable Income
  → apply tax rates
  → calculate tax owed

🧮 Example

You’re single and earned $60,000.
You take the standard deduction of $14,600.

Taxable Income
$60,000 − $14,600 = $45,400

You pay tax on $45,400, not the full $60,000.