What are common income tax deductions?

Tax season can be overwhelming, but understanding common tax deductions can significantly reduce your taxable income and save you money. The following are common tax deductions to consider for individuals and businesses. These tax deductions are grouped by category to make it easier to identify which deductions might apply to your situation:

1. Personal Deductions

  • Medical and Dental Expenses (if exceeding 7.5% of your AGI)
    • Doctor visits, surgeries, prescriptions
    • Health insurance premiums (if not through pre-tax payroll deductions)
    • Long-term care insurance premiums (limits apply based on age)
    • Medical travel expenses (mileage, parking, tolls)
  • State and Local Taxes (SALT) (capped at $10,000)
    • State income taxes or sales taxes (choose one)
    • Property taxes on real estate and vehicles
  • Mortgage Interest
    • Primary and secondary residence mortgages
  • Charitable Contributions
    • Cash donations (up to 60% of AGI)
    • Non-cash items donated to qualified charities (e.g., clothing, furniture)
    • Mileage and expenses related to volunteer work
  • Education Expenses
    • Student loan interest (up to $2,500; income limits apply)
    • Tuition and fees deduction (may still apply in specific cases)
  • Energy Efficiency and Renewable Energy Credits
    • Solar panels, solar water heaters, geothermal heat pumps, and wind turbines 
    • Energy-efficient doors, windows, and insulation 
    • Note: These are technically credits, not deductions, but they reduce your tax bill directly.

2. Business and Self-Employment Deductions

  • Home Office Deduction (if applicable)
    • Portion of rent, utilities, and internet expenses
    • Depreciation on your home (if owned)
    • Office supplies and furniture
  • Vehicle and Travel Expenses
    • Mileage for business purposes (65.5 cents per mile for 2024)
    • Business-related airfare, hotels, and meals (50% for meals, 100% for travel)
  • Health Insurance Premiums
    • For self-employed individuals (subject to income limitations)
  • Retirement Contributions
    • SEP IRA, SIMPLE IRA, or Solo 401(k) contributions (limits vary by plan)
    • Traditional IRA contributions (if eligible)
  • Business Equipment
    • Computers, phones, software (may qualify for Section 179 or bonus depreciation)
    • Tools and supplies for your trade or profession

3. Investment and Income-Producing Activity Deductions

  • Investment Interest Expense
    • Interest paid on loans used to purchase taxable investments
  • Rental Property Expenses
    • Mortgage interest, property taxes, insurance
    • Repairs and maintenance
    • Depreciation of property
  • Tax Preparation Fees
    • Only deductible if you are self-employed or have other income-producing activities.

4. Miscellaneous Deductions

  • Casualty and Theft Losses (only for federally declared disasters)
  • Union Dues (if you’re self-employed or for specific industries)
  • Educator Expenses (up to $300 for unreimbursed classroom supplies)

2024 Standard Deductions

The standard deduction is a flat-dollar amount that reduces your taxable income, available to most taxpayers who do not itemize deductions. For the 2024 tax year (to be filed in 2025), the standard deduction amounts are:

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

Who Should Take the Standard Deduction?

Most taxpayers take the standard deduction because it is simpler and often results in a lower tax bill unless:

  • Your itemized deductions (for mortgage interest, state taxes, and medical expenses) exceed the standard deduction.
  • You have significant deductible expenses not covered by the standard deduction.

You can only claim itemized deductions if they exceed your standard deduction. Ensure you keep detailed records and receipts to substantiate deductions in case of an audit.  Additionally, some deductions have phase-outs based on income levels or specific requirements.

Tax laws change frequently. Always consult with a tax expert like Waldman Accounting for guidance specific to your situation. Understanding and utilizing common tax deductions can lead to significant savings. By staying organized and informed, you can make the most of the tax benefits available to you.

Have questions? Talk to our experts.

Phone

954-347-9647

Email

ianwaldman@waldmanaccounting.com

Address

Ft. Lauderdale, Florida