For most people, filing taxes can be stressful—with forms to finish and figures to add up, not to mention the potential of a massive tax bill at the end of it all. But there are easy ways to lower your bill, namely tax deductions.
A tax deduction is an expense you can subtract from your total taxable income when filing taxes. This reduces your overall tax burden, allowing you to keep more of the money you make.
There are two ways to do this: taking the standard deduction or itemized deductions.
Standard vs. Itemized Deductions
The standard deduction is a flat rate, depending on your filing status, set by the IRS that you can claim on your tax return. For the 2022 tax year (returns filed in 2023), the amounts are $12,950 for single filers, $25,900 for married couples filing jointly and $19,400 for heads of households.
Instead of the standard deduction, you might decide to itemize deductions by adding up certain expenses and deducting them on Schedule A. You’ll save money going this route if your total itemized deductions are greater than the standard deduction available for your filing status.
With itemizing, you also have tons of options to choose from. Here are the 10 most popular ones you may be able to claim on your 2022 tax return:
- Charitable Donations
You can deduct charitable contributions of money or property made to qualified organizations. Generally speaking, the charity must be a registered 501(c)(3) organization, and you must make the donation before the end of the tax year.
Some common types of charitable donations eligible for tax deductions include cash or checks and non-cash items such as clothing or household goods.
- Medical and Dental Costs
If you have qualifying medical expenses, you may be able to deduct those costs on your tax return. Medical expenses eligible for deduction include health insurance premiums, prescription medications and copays. You can find a complete list of eligible expenses in IRS Publication 502.
The trick with itemizing medical expenses is that you can only deduct those that exceed 7.5% of your adjusted gross income.
- Mortgage Interest Payments
Mortgage interest is a great way to shave off a portion of your taxable income and can be a significant tax deduction for homeowners. You can deduct mortgage interest for primary residences and one secondary or vacation home.
But the IRS caps the amount of interest you can deduct. The current cap is interest paid on up to $750,000 of indebtedness for all taxpayers except for married couples filing separately, who can deduct interest on up to $375,000 of mortgage debt each.
- State and Local Taxes
The state and local tax deduction allows you to deduct state and local income taxes or sales taxes as well as property taxes. However, your deduction is capped at $10,000 in total ($5,000 if married and filing separately).
- Above-the-Line Deductions
Above-the-line deductions, also known as adjustments to income, are expenses you can claim on your tax return in addition to either the standard deduction or itemizing. You deduct these expenses on Schedule 1 attached to your Form 1040.
- Student Loan Interest
You can deduct interest paid on student loans you took out for yourself, your spouse or your dependents. The maximum deduction is $2,500 per year.
- Educator Expenses
The educator expense deduction allows K-12 educators to deduct up to $300 in out-of-pocket expenses for books, supplies, computer equipment and other classroom materials they purchased for use in the classroom. This deduction is only available to teachers, instructors, counselors, principals and classroom aides who work at least 900 hours during the school year.
- IRA Contributions
For 2022, taxpayers under 50 can contribute up to $6,000 to an individual retirement account (IRA), while taxpayers 50 and older can contribute up to $7,000. These contributions may be tax-deductible, but your deduction might be limited if you or your spouse are covered by a retirement plan at work.
- Self-Employed Health Insurance
If you’re self-employed, you can deduct health insurance premiums for yourself and your family. This deduction applies to any health plans you might have, including health insurance purchased through the Health Insurance Marketplace or directly from an insurer, as well as vision and dental insurance.
- Health Savings Account Contributions
Health savings accounts (HSAs) are tax-advantaged savings accounts that allow you to save money for medical expenses. Contributions to HSAs are tax-deductible, meaning you can reduce your taxable income when you contribute to the account. For 2022, you can contribute up to $3,365 for an individual HSA or $7,300 for a family account.
The bottom line? There are a lot of potential tax deductions out there, and it’s worth exploring as many as possible. If you need help identifying all the deductions you qualify for—and want to ensure you get the biggest refund or pay the lowest taxes possible—speak with a qualified tax professional.
Janet Berry-Johnson is a CPA and a freelance writer who enjoys making complicated topics like accounting and taxes easy to understand.
Illustration by Zara Picken
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