What Can I Deduct On My Taxes? + FAQs

In 2025, U.S. taxpayers can deduct a wide array of expenses to lower their federal taxable income.

This includes the Standard Deduction (a flat amount based on your filing status) or, if you itemize, specific expenses like mortgage interest, state and local taxes (up to certain limits), charitable contributions, and medical costs above certain thresholds. Self-employed individuals and business owners can also deduct ordinary and necessary business expenses (such as home office use, travel, and equipment), and everyone may qualify for various above-the-line adjustments to income (like certain retirement contributions or student loan interest).

According to a 2023 H&R Block survey, 62% of taxpayers didn’t know they can amend a prior return to claim missed deductions or credits—meaning each overlooked tax break could cost them hundreds in lost refunds. These missed opportunities underscore why understanding what you can deduct is so important for your 2025 tax return.

In this guide, you’ll learn:

• 💰 Top Deductions to Maximize Your Refund – The must-know write-offs you can claim in 2025, from the standard deduction to big itemized breaks.
• 🚫 What Not to Deduct – Common mistakes that trigger IRS red flags (like trying to write off personal or double-dipped expenses) and how to avoid costly errors.
• 📊 Deductions by Status & Job – How your filing status (single, married, head of household) and occupation (freelancer, W-2 employee, small business owner) affect what you can deduct.
• 🏷️ Real-Life Scenarios – Detailed examples with breakdown tables for freelancers, regular employees, and small business owners to see deductions in action.
• ⚖ Tax Laws & Definitions Explained – The legal backbone (IRS rules, Tax Court cases) that defines deductions, plus easy definitions of key terms like AGI, Schedule A, Form 1040, and more.

Immediate Tax Savings: Exactly What You Can Deduct in 2025

Quick Answer: You have two main ways to deduct on your federal taxes – take the flat standard deduction or itemize deductions – plus several special adjustments and business write-offs depending on your situation. In 2025, the Standard Deduction amounts are approximately $15,000 for single filers, $30,000 for married filing jointly, and $22,500 for heads of household. This set amount is a guaranteed deduction that most taxpayers claim, and it requires no documentation of expenses. If you choose the standard deduction, you typically cannot itemize further, but you still can claim certain “above-the-line” deductions (adjustments) and credits separately.

If you have large deductible expenses that exceed the standard amount, you can itemize deductions on Schedule A of your Form 1040. Common itemized deductions include:

• Home Mortgage Interest: Interest (and points) paid on loans for your primary or secondary residence, up to loan limits. (For mortgages originated after 2017, interest on up to $750,000 of debt is deductible; older loans are grandfathered up to $1 million.)
• State and Local Taxes (SALT): This covers state/local income or sales taxes plus property taxes, up to a combined $10,000 cap ($5,000 if married filing separately). Even if you paid more, you can only deduct up to $10k due to current law.
• Charitable Contributions: Donations to qualified charities can be deducted if you itemize. Cash donations are generally deductible up to 60% of your Adjusted Gross Income (AGI). Donations of goods or appreciated assets have their own limits (usually 30% or 20% of AGI in some cases). Remember to keep receipts or acknowledgment letters for any single donation of $250 or more.
• Medical and Dental Expenses: Out-of-pocket medical costs (for you, your spouse, or dependents) above 7.5% of your AGI can be deducted if you itemize. For example, if your AGI is $100,000, you can deduct qualified medical expenses exceeding $7,500. Eligible expenses include things like doctor visits, prescriptions, medical devices, and even certain travel costs for medical care.
• Other Itemized Deductions: These include things like casualty and theft losses from a federally declared disaster, and in limited cases unreimbursed job expenses or tax preparation fees (though most of these miscellaneous deductions are suspended for 2025 at the federal level, as we’ll cover).

Beyond itemizing, above-the-line deductions (adjustments to income) are expenses you can deduct even if you don’t itemize. They are subtracted on Schedule 1 before your AGI is calculated. Key examples for 2025 include:

• Retirement Contributions: If you contribute to a traditional IRA (and meet the income limits), you can deduct that contribution up to $6,500 (or $7,500 if age 50+). Note that contributions to a 401(k) or similar employer plan are typically already pre-tax, so they’re not deducted on your return.
• Health Savings Account (HSA) Contributions: If you have a high-deductible health plan and contribute to an HSA, those contributions (up to $4,150 self-only or $8,300 family in 2025) are deductible above the line.
• Student Loan Interest: You can deduct up to $2,500 of interest paid on student loans, as long as your income is below the phase-out range (this is an adjustment anyone can take without itemizing).
• Self-Employment Tax and Other Self-Employed Adjustments: If you’re self-employed, you get to deduct half of your self-employment tax (the Social Security/Medicare tax you pay as both employee and employer) as an adjustment. You can also deduct self-employed health insurance premiums, contributions to a SEP-IRA or Solo 401(k), and similar business-related personal adjustments directly on your Form 1040.
• Educator Expenses: If you’re a K-12 teacher or school educator, you can deduct up to $300 of out-of-pocket classroom supplies as an above-the-line deduction (if married educators, each can take $300).

Finally, certain occupations or situations have their own special deductions. For example, many small-business owners, S-corporation shareholders, and partners in partnerships can take the Qualified Business Income (QBI) deduction – also known as the 20% pass-through deduction. This allows eligible business owners to deduct 20% of their qualified business profit on their personal return (subject to various rules and thresholds). The QBI deduction is in addition to any expenses the business writes off; it’s a bonus deduction aimed at small businesses and freelancers. (Note: The QBI deduction, along with many current tax rules, is scheduled to expire after 2025 unless extended by Congress.)

Standard vs. Itemized Deduction – Pros and Cons

Deciding whether to take the standard deduction or to itemize is a crucial choice that can affect your tax bill. Here’s a quick comparison:

Pros of Standard Deduction	Cons of Standard Deduction
Simplicity: It’s easy – no need to track receipts or calculate individual expenses. Just take a fixed amount and you’re done.	Might Miss Out: If you have deductible expenses beyond the standard amount, you won’t benefit from them. (For instance, homeowners with large mortgages or big medical bills could save more by itemizing.)
No Documentation Required: Since it’s a flat amount, you generally don’t have to provide proof of expenses to the IRS when you take the standard deduction.	One-Size-Fits-All: The amount is the same for many taxpayers in your filing status. It doesn’t account for unique situations – e.g. you paid $15k in mortgage interest but the standard for single filers is $15k, so effectively your housing expense gives no extra tax benefit if you don’t itemize.
Avoids Specific Limits: You don’t worry about individual deduction caps (like the SALT $10k limit or 7.5% AGI threshold for medical) because the standard deduction isn’t based on specific expense types.	Must Forego Itemizing: You cannot itemize in the same year you take the standard. If some of your expenses are unusually high, the excess over the standard deduction is essentially unused for tax purposes.

Tip: Generally, take the standard deduction if your total itemizable expenses would be less than the standard amount for your filing status. If your deductible expenses add up to more than the standard (or just slightly less, in some cases), consider itemizing to reduce your taxable income further. Remember, you choose whichever method gives you the larger deduction. (Tax software or a tax advisor can help compare the two in numbers.)

Keep in mind that roughly 90% of taxpayers now take the standard deduction, thanks to its significant increase under recent tax law. Itemizing tends to make sense mainly for those with sizable mortgage interest, high state taxes (not fully capped by SALT), big charitable contributions, or large medical bills. If you do itemize, be diligent about record-keeping – you should have receipts, statements, or Form 1098 (for mortgage interest) to back up those deductions in case of an IRS query.

Next, we’ll delve into what you should not deduct on your taxes – because not everything that feels like a “tax expense” is actually allowed.

Audit Red Flags: What Not to Deduct (Common Mistakes & Risks)

Not every expense that feels work-related or important will be tax-deductible. The IRS has clear rules banning certain deductions, and claiming something you shouldn’t can lead to problems ranging from a denied deduction to penalties. Here are some common “no-nos” to watch out for when deciding what you can deduct:

• 🚫 Personal Living Expenses: Costs of day-to-day life are never deductible. This means you cannot deduct your rent or mortgage principal, home utilities (except part of them in a qualified home office calculation), groceries, or commuting costs to your regular job. For example, your daily subway fare or gas driving to the office is considered personal commuting, not a business expense. Similarly, clothing you wear to work (like suits or business casual attire) is not deductible – even if your job requires professional dress – because it’s considered suitable for everyday use (one famous Tax Court case denied a news anchor’s deduction for designer work clothes on these grounds).

• 🚫 Double Dipping on Pre-Tax Benefits: You can’t deduct something twice. If you already received a tax break for an expense, you cannot claim it again as a deduction. For instance, if your employer reimburses you for an expense or you pay with pre-tax dollars (such as via a flexible spending account or an employer-provided retirement plan), you cannot also deduct it on your tax return.
  • A common example is health insurance premiums: if they’re paid through your employer pre-tax, you can’t deduct them again. Likewise, you can’t deduct contributions to a 401(k) because those are typically made with pre-tax income (reducing your W-2 wages).

• 🚫 Fines, Penalties, and Illegal Expenses: Any fines or tickets (speeding tickets, parking fines, late fees to the government) are strictly non-deductible. The IRS and tax law explicitly disallow deductions for penalties paid to any government or municipality. Also, expenses incurred in illegal activities generally aren’t deductible (for example, you can’t deduct bribes or illicit payments; even state-licensed cannabis businesses are denied most deductions by federal law under special tax code rules).

• 🚫 Home Office Imposters: The home office deduction is a great tax break if you qualify – but a common mistake is taking it when you shouldn’t or overstating it. To legitimately deduct a home office, a part of your home must be used exclusively and regularly for your trade or business. Using your dining table as a makeshift desk doesn’t count if your family also eats dinner there.
  • And if you’re a W-2 employee working remotely, you unfortunately cannot deduct a home office or any unreimbursed work-from-home expenses on your federal return in 2025 (those deductions were suspended until 2026 for employees). Only self-employed folks (or certain statutory employees) can currently claim home office expenses on their taxes. Trying to claim a home office as an employee, or claiming your whole home when you only use one room for work, is a red flag and not allowed.

• 🚫 Mischaracterized Personal Expenses as Business: Be cautious not to mix personal spending with business deductions. The IRS watches for individuals claiming hobbies or lifestyle activities as “business” write-offs without a legitimate profit motive. For example, writing off a family vacation as a “business trip” when little to no business was conducted can get you in trouble.
  • (If you attend a conference or meet clients on a trip, you can deduct related costs, but taking a purely personal trip and calling it business is a big no.) Similarly, extravagant or lavish entertainment is no longer deductible at all – the tax law changed a few years ago to disallow deductions for entertainment like sporting events or cruises with clients. Even meals, which are partially deductible in business, must be directly related to business purposes and not excessive.

• 🚫 The 100% Personal Vehicle Claim: If you use a vehicle for both work and personal reasons, you can’t deduct all your car expenses – only the portion used for business. A common mistake is trying to write off your entire car payment or all your auto insurance because you occasionally drive for work. You must allocate business vs. personal use (or use the standard mileage rate for business miles). Commuting miles (driving from home to your main workplace) are never deductible. Only travel between job sites or to meet clients, etc., counts as business mileage. Overstating business use of a car is a frequent audit trigger.

• 🚫 Unsubstantiated Charitable Donations: Charitable giving can be deductible, but you need records. Don’t try to claim cash donations without receipts or big non-cash donations (like clothing or furniture) without proper valuation and documentation. The IRS will deny charitable deductions if you lack required paperwork (for instance, donations over $250 require a written acknowledgment from the charity). Also note that contributions to individuals, GoFundMe campaigns, or political organizations are not tax-deductible – only donations to qualified nonprofit charities count. Deducting something like giving money to a friend in need, while kind, is not a charitable deduction in the eyes of the IRS.

Risks of claiming disallowed deductions: If you put something on your tax return that isn’t permitted, the IRS can remove it during processing or audit. That means you’d have to pay back the tax benefit you received, plus interest. In some cases, you could face a penalty. For example, there’s a 20% accuracy-related penalty if your underpayment of tax is due to negligence or disregard of rules.

While small mistakes often just result in a tax notice and no harsh penalties, larger or obvious abuses (like falsely claiming huge write-offs) can definitely cost you. At the extreme end, fraudulent deductions (willfully lying on your taxes) can bring even steeper penalties or legal trouble. The bottom line: it’s just not worth trying to cheat or stretch the rules. Stick to legitimate deductions – there are plenty available!

If you’re unsure about a particular expense, do some research or consult a tax professional. It’s better to ask, “Is this deductible?” than to assume and risk an audit. Next, let’s look at how deductions play out in real-world scenarios, with concrete examples for different types of taxpayers.

Real-World Scenarios: Detailed Deduction Examples

Every taxpayer’s situation is unique. Let’s explore a few common scenarios to see what deductions might look like in practice. Below, we’ll break down examples for a freelancer, a W-2 employee, and a small business owner. These illustrations will show the kinds of deductions each might claim on a 2025 tax return.

Freelancer Deduction Breakdown

Imagine Alex, a freelance graphic designer (a self-employed sole proprietor). Alex operates a one-person business out of a home office and receives 1099-NEC forms from clients. As a freelancer, Alex can take advantage of numerous deductions related to the business:

Deduction Category	How It Works for a Freelancer (Alex’s Example)
Home Office	Alex uses a spare room exclusively as a studio/office. The room is 10% of the home’s square footage. Alex can deduct 10% of home expenses like rent, utilities, and renters insurance as a home office expense. (If Alex owned the home, 10% of mortgage interest and property taxes would go here, but those could also be itemized separately – only one use or the other.)
Equipment & Supplies	Any computer, software, drawing tablet, printer, office furniture, etc., bought for the business is deductible. Alex bought a new laptop for $2,000 in 2025 solely for work – that’s a $2,000 deduction (either depreciated or under the Section 179 immediate expensing, since it’s business equipment). Routine supplies like printer ink, sketch pads, and online subscriptions for design software are fully deductible as well.
Internet and Phone	Alex’s internet service and cell phone are partly business-use. After tracking usage, Alex determines about 70% of the internet bandwidth and phone minutes are for work. So, Alex deducts 70% of the annual internet bill and phone bill as a business expense. (The remaining 30% used personally is not deducted.)
Travel & Meals	Driving to meet local clients, Alex tracks mileage. In 2025, the IRS standard mileage rate might be around 65.5 cents per mile (rate subject to change each year). If Alex drove 1,000 business miles, that’s a ~$655 vehicle expense deduction. If any business meals occur (say Alex takes a client to lunch to discuss a project), 50% of those meal costs are deductible. Alex keeps receipts for those meals and notes the business purpose (e.g., “Project kickoff meeting with Client X on 3/10/2025”).
Self-Employment Tax Deduction	As a freelancer, Alex must pay self-employment tax (covering Social Security and Medicare) on the business profit. Suppose Alex’s freelance profit is $80,000. The SE tax on that might be around $11,304. Alex gets to deduct half of that (approx $5,652) as an above-the-line deduction on the Form 1040. This deduction reflects the “employer” portion of payroll taxes that self-employed individuals can write off.
Health Insurance Premiums	Alex pays for a personal health insurance plan (not through an employer). Because Alex is self-employed, those health premiums (for Alex, Alex’s spouse and dependents if any) are 100% deductible as an adjustment to income. For example, if $5,000 was spent on health insurance in 2025, Alex can deduct the full $5,000 above the line (provided Alex had a net profit at least that amount – the deduction can’t exceed business profit).
Retirement Contributions	To save for the future and get a deduction, Alex contributes to a SEP-IRA (a common self-employed retirement plan). With a net profit of $80k, Alex could contribute up to ~20% of net self-employment earnings. Let’s say Alex puts $10,000 into the SEP-IRA. That $10,000 is deductible as an above-the-line retirement contribution for self-employed.
Qualified Business Income (QBI)	After all these deductions, assume Alex’s taxable business profit is still around $60,000. Alex may qualify for the 20% QBI deduction. Roughly, that could knock off an extra $12,000 from taxable income. (There are no employees and the income is under the threshold, so likely fully eligible.) This deduction doesn’t require any spending – it’s a bonus based on profit.

By leveraging these deductions, Alex significantly reduces taxable income. For instance, earning $80,000 gross and having $20,000 of various business expenses brings profit to $60,000. Then the half SE tax deduction, health insurance, retirement, etc., might further reduce AGI. After the standard deduction (if no itemizing), Alex’s taxable income could drop dramatically, saving thousands in taxes.

Takeaway: Freelancers should keep detailed records and save receipts. Every business-related expense – no matter how small (a $5 parking meter for a client meeting or a $20 monthly design app fee) – can add up to reduce your tax bill. Use Schedule C to list these, and don’t forget the above-the-line adjustments self-employed folks get.

W-2 Employee Work Expenses (Limits in 2025)

Now consider Taylor, an office employee (W-2), who doesn’t have a business. Taylor’s tax deductions landscape is very different from Alex’s:

Possible Deduction	How It Applies (or Not) to a Regular Employee
Standard Deduction	Taylor will likely use the standard deduction of $15,000 (single) or $30,000 (if married filing jointly), etc., unless owning a home or other factors make itemizing beneficial. Most W-2 folks take the standard because itemized expenses often don’t exceed it after the 2017 law changes.
Mortgage Interest & Property Tax	If Taylor owns a home, these itemizable expenses can make itemizing worthwhile. For example, $8,000 of mortgage interest and $6,000 of property tax = $14,000. Taylor would need other deductions (or a spouse and double amounts) to beat the standard deduction threshold. If renting, there’s no equivalent deduction for rent on a federal return.
State Tax (SALT) Deduction	Taylor can itemize state income tax withheld (or sales tax) plus local property taxes, but only up to $10,000. In a high-tax state, a W-2 earner might easily hit that $10k cap (e.g., $7k state income tax + $5k property tax = limited to $10k deduction). If Taylor is single with $10k of SALT and say $5k charity donations, those combined $15k would marginally exceed the $15k standard, making itemizing barely advantageous. It’s a numbers game each year.
Unreimbursed Work Expenses	Here’s the big catch: unreimbursed employee expenses are NOT deductible on federal returns in 2025. Prior to 2018, Taylor could deduct things like required uniforms, union dues, professional dues, unreimbursed travel, or a home office (if working remotely for employer) as itemized deductions (subject to 2% of AGI threshold). But the tax law suspended these through 2025. So, if Taylor spends $1,000 on job-related supplies that the employer doesn’t reimburse, it’s unfortunate, but no federal deduction. (One exception: certain categories of employees, like Armed Forces reservists traveling for reserve duties, or qualified performing artists with low incomes, can deduct some expenses on Form 2106 above-the-line. Taylor likely doesn’t fall into these special cases.)
Education and Training	If Taylor goes back to school or takes courses related to the job, those costs aren’t deductible as an itemized deduction either (that would have been an unreimbursed job expense). However, Taylor might qualify for education credits like the Lifetime Learning Credit – but that’s a credit, not a deduction. Keep in mind, the former tuition deduction expired in 2020, so no direct deduction for tuition exists in 2025.
Retirement Contributions	Taylor’s 401(k) contributions are handled via payroll pretax – effectively giving a tax benefit. If Taylor also contributes to a Traditional IRA outside of work, that might be deductible, but only if Taylor’s income is under certain limits or not covered by a retirement plan at work. For example, if Taylor’s employer has no 401(k), Taylor could deduct a traditional IRA contribution up to $6,500. If the employer does have a plan and Taylor’s income is high, the IRA deduction might be disallowed. This is an area to check IRS rules each year.
Student Loan Interest	If Taylor is paying off student loans, up to $2,500 of the interest can be deducted as an adjustment to income (above-the-line). This is available to W-2 employees as well as anyone else, as long as income is below roughly $85k single or $175k married (figures adjust for inflation). This deduction phases out at higher incomes, but many middle-income earners can take it.
Health Savings or FSA	If Taylor has a High Deductible Health Plan at work and contributes to an HSA, those contributions are likely made pretax via payroll. Similarly, flexible spending account (FSA) contributions for health or dependent care reduce taxable wages. They’re not deductions on the tax return because the benefit is received upfront on the W-2 (the wages in box 1 are lower). Taylor should just be aware that those are tax-advantaged, even if they don’t show up as line items on the 1040.

As a W-2 employee in 2025, Taylor’s main federal deduction is probably the standard deduction (plus any above-the-line adjustments like student loan interest or an IRA if applicable). Itemizing might come into play if Taylor has a home mortgage, significant charitable donations, or extreme medical bills one year. Otherwise, post-TCJA, most employees don’t itemize because they simply don’t have enough deductible expenditures above the higher standard deduction.

One more note: Some states still allow deductions for unreimbursed employee expenses even though the feds don’t. So Taylor might keep receipts for, say, union dues or a required tool purchase, to claim on a state tax return. (We’ll cover state differences in a later section.) But on the federal return, Taylor should not list those – it will do no good and the IRS will ignore them.

Small Business Tax Write-Offs

Now let’s look at Jamie, who owns a small business (JJ’s Bakery LLC). Jamie has an actual storefront bakery and maybe a couple of employees. The business is organized as a pass-through (say, an S-corporation or LLC taxed as an S-corp). Jamie draws a salary via W-2 from the business and also gets pass-through income on a K-1. The deductions in this scenario fall into two buckets: business deductions on the business’s own tax return, and personal deductions on Jamie’s individual return related to the business income.

On the business side (corporate or LLC return), Jamie’s bakery can deduct all the ordinary expenses of running the bakery:

Business Expense	Deduction Treatment for Small Business
Inventory & Supplies	Cost of ingredients (flour, sugar, etc.), packaging, and other supplies are deductible against business income. These are accounted for as Cost of Goods Sold or supplies expense. If $50,000 was spent on ingredients this year, that’s $50k deducted from sales revenue.
Rent and Utilities	The bakery rents a shop space – the rent is fully deductible. Say rent is $2,000/month, so $24,000/year is a business expense. Likewise, electricity, water, and gas for the bakery oven are deductible utilities.
Equipment & Depreciation	Big ovens, mixers, display cases – these are capital assets. The bakery can deduct them through depreciation over their useful life, or potentially use Section 179 to expense them in one year (if within limits). E.g., a new oven costing $10,000 might be fully expensed in 2025 under generous depreciation rules, giving an immediate $10k write-off.
Employee Wages & Benefits	Jamie’s business can deduct the wages paid to the bakery staff, the payroll taxes the business pays, and any benefits (like health insurance contributions for employees). For instance, if total payroll (not including Jamie’s owner salary) is $100,000, that’s fully deductible to the S-corp. Note: Jamie’s own salary is also a deductible expense for the company; it will be income on Jamie’s personal side, but the business deducts it like any other wage expense.
Business Insurance & Licenses	Expenses like business liability insurance, a health inspection fee, business licenses, and permits are deductible. These routine overhead costs all reduce business profit.
Advertising & Marketing	Money spent on flyers, a website, online ads, etc., is deductible. If $5,000 was spent on advertising the bakery, that’s $5k off the profits.
Vehicle or Delivery Expenses	If the bakery has a delivery van used 100% for business (to deliver large orders, pick up supplies), all the vehicle costs – gas, maintenance, insurance – are deductible. If Jamie uses a personal car part-time for bakery errands, then a mileage method or percentage of use would determine the deduction.
Interest on Business Loans	If Jamie took a small business loan or uses a business credit card, the interest paid is deductible as a business expense. For example, interest on a loan used to buy that oven or to finance a start-up cost is write-off eligible.

These business deductions are taken on the business tax return (Form 1120-S for S-corp, or Schedule C/partnership return as appropriate), reducing the pass-through income that ultimately goes to Jamie.

On Jamie’s personal 1040 side, the main deduction specific to being a business owner is the Qualified Business Income (QBI) deduction. Suppose after all expenses, the bakery’s profit (flow-through to Jamie) is $80,000 in 2025. Jamie may take a 20% QBI deduction of about $16,000 on the personal return, further reducing taxable income. (Eligibility for QBI in this case is likely, since it’s a domestic business and under high-income thresholds, and baking isn’t a disqualified service trade.)

Other personal deductions for Jamie would be similar to any individual: standard or itemize. Owning a business doesn’t change the ability to deduct mortgage interest or charity, etc., on the individual return. But one thing to note: if Jamie’s business had a net operating loss, that loss could potentially offset other personal income. While not a “deduction” per se, it means if the bakery had a bad year and lost $10,000, that loss might reduce Jamie’s taxable income from other sources (subject to some limits).

Takeaway for small business owners: Deduct everything that is an ordinary and necessary cost of doing business on the business return – this lowers the profit that flows through to you and thereby lowers your personal tax. Then, on your individual taxes, don’t forget that additional 20% QBI deduction if applicable. As always, maintain good records (accounting books, receipts) because the IRS expects more substantiation in a business context (and the U.S. Tax Court will too, should any deduction ever be challenged).

These scenarios highlight how different the deduction picture can be for various taxpayers. Next, we’ll discuss the legal framework behind deductions – why some things are deductible and others aren’t – by looking at relevant tax laws and a few landmark cases.

Tax Law in Action: Case Law, Rulings, and Legal Evidence

Why can you deduct some expenses but not others? The answers lie in the tax code and regulations, as well as years of IRS rulings and court decisions that interpret those laws. Understanding the legal backbone of deductions can give you insight into what’s allowed.

At a high level, the Internal Revenue Code (IRC) says that “all income is taxable, from whatever source derived, unless specifically exempted” – and conversely, no deduction is allowed unless specifically authorized. In plain terms, you start with the assumption you can’t deduct something unless there’s a rule that says you can. Two of the most important provisions that authorize deductions are:

• IRC Section 162 (Trade or Business Expenses): This section allows a deduction for “ordinary and necessary” expenses paid or incurred in carrying on a trade or business. It’s the cornerstone for all business-related deductions, from a sole proprietor’s paper clips to a multinational corporation’s factory costs. The terms “ordinary and necessary” have been fleshed out by courts: ordinary means common and accepted in your type of business, and necessary means appropriate and helpful for the business (it need not be absolutely essential, just helpful).
• IRC Section 262 (Personal, Living, and Family Expenses): This one explicitly disallows personal expenses. It’s why you can’t deduct that new suit or your grocery bill – those are personal. The challenge in tax law is often drawing the line between personal and business (or personal and investment). When an expense has elements of both, the IRS and courts have to decide if it’s sufficiently business-related to qualify. Often, allocations are made (e.g., business vs personal use of a vehicle, as we discussed).

The Role of the IRS and Tax Court: The IRS writes regulations and rulings to interpret the tax code and provides guidance (like revenue rulings, private letter rulings, etc.). If you deduct something aggressive and the IRS disagrees, they might deny it on audit. You then have the right to appeal or even go to the U.S. Tax Court (or other federal courts) to argue your case. The U.S. Tax Court specifically hears taxpayer disputes without requiring you to pay the tax first. Many of our modern understandings of what’s deductible come from Tax Court decisions.

Here are a few famous (and entertaining) Tax Court cases and rulings that shed light on the boundaries of deductions:

• Hess v. Commissioner (1994): In this landmark case, an exotic dancer (stage name “Chesty Love,” real name Cynthia Hess) deducted the cost of her breast augmentation surgery as a business expense. The implants were unusually large and were deemed surgical stage props essential to her income-generating performance. The Tax Court agreed that this was an ordinary and necessary expense for her line of business (adult entertainment), and allowed her to depreciate the cost of the implants. The rationale was that the surgery was not done for personal cosmetic reasons, but for business – and the implants had no personal benefit outside of her professional work. This case is often cited to illustrate how an expense that is typically personal (cosmetic surgery) can become deductible if it meets the business criteria in an extreme way.

• Pevsner vs. Commissioner (1980): A contrasting clothing case involved a luxury boutique manager who was required to wear the store’s designer clothing while at work. She attempted to deduct the costly Yves Saint Laurent outfits as a uniform. The court denied the deduction, ruling that the clothes were adaptable to general use (even if she personally said she wouldn’t wear them off-duty). This and similar cases (e.g., news anchors with wardrobes) established the principle that work clothes are only deductible if they are not suitable for street wear (for example, a nurse’s scrubs or a police officer’s uniform can be deductible if the employee had to buy them, because those aren’t normal everyday clothes).

• Henry v. Commissioner (1971) – The Bodybuilder’s Oil: In a private letter ruling and subsequent cases, the IRS allowed a professional bodybuilder to deduct the cost of body oil used in competitions. Why? It was considered directly related to the competitive presentation and had no personal purpose aside from bodybuilding contests. This is another quirky example demonstrating that if you can firmly prove an expense is exclusively for business and not personal enjoyment, it may be deductible, no matter how odd.

• Cherry v. Commissioner (T.C. Memo 1983-470): This case involved a swimming pool installed on a doctor’s advice to treat a medical condition (the taxpayer had emphysema and swimming was therapy). The taxpayer deducted part of the pool installation cost as a medical expense. The Tax Court allowed the deduction to the extent the pool’s cost exceeded the added value to the home. Essentially, if the pool cost $20,000 and made the home $8,000 more valuable, the remaining $12,000 was considered a medical expense. This case highlights how medical deductions can extend to capital improvements if done primarily for medical care (and if you itemize and pass the AGI threshold). It also shows the nuanced calculations courts do to ensure only the portion truly related to the medical need is deducted.

• Ochotorena v. Commissioner (2018) – a more recent Tax Court case that reinforced the strict requirements for home office deductions. The taxpayer claimed a home office but admitted it was also used for personal purposes. The court disallowed the deduction, reiterating the exclusive use test: a home office must be used only for business. Even occasional personal use can taint the deduction. This isn’t a famous case name-wise, but it reflects how courts consistently enforce the rules Congress sets.

• Various “hobby loss” cases: Section 183 (the hobby loss rule) says if an activity is not engaged in for profit, deductions are limited. The Tax Court frequently sees cases where taxpayers claim business deductions for activities that look like hobbies (horse breeding, yacht charters, photography, etc.). The court uses several factors (profit motive, record-keeping, expertise, time spent, etc.) to decide if it’s a true business. If deemed a hobby, deductions can’t exceed income from the activity. For example, if someone tried to deduct $50,000 of ranch expenses with only $2,000 of income and no profit history, the court might call it a hobby and disallow the losses. The lesson: you must have a bona fide profit motive to deduct losses long-term.

These cases collectively demonstrate a key point: documentation and purpose matter. The IRS and courts will look at why you incurred an expense and how well you can substantiate it. The tax law is full of grey areas, but precedent helps clarify them. For instance, the IRS has published rulings that clarify gray areas like:

• You can deduct costs of seeking tax advice or preparation (but through 2025, that’s only if you’re self-employed or it’s on a business return; personal tax prep fees aren’t deductible currently).
• You cannot deduct the value of your own time or labor. For example, if you fix your own rental property, you can’t “charge yourself” a deduction for your labor – only actual expenses.
• Mileage vs actual car expenses: IRS rules let you choose the standard mileage rate or actual costs, but you have to stick with one method per vehicle (with some exceptions), and you must keep a log of business miles.
• The IRS defines “travel away from home” as requiring an overnight stay to be travel expenses (meals, lodging) – courts have upheld that quick day trips don’t allow you to deduct meals because you weren’t away long enough to need rest.

Tax Court’s relevance: If you ever are in a grey area, looking up Tax Court summaries can be enlightening. It shows how the law is applied in real scenarios. Most people won’t end up arguing in court, but knowing that, say, the court allowed cat food for a junkyard business (to attract feral cats to kill snakes and rats – yes, that deduction was permitted as an “ordinary and necessary” expense for that business!), can bolster understanding of the logic: It had a clear business purpose, even though normally cat food isn’t deductible.

Bottom line: The combination of IRS rules and court cases creates the practical do’s and don’ts of deductions. If in doubt, think: Is this expense ordinary for my line of work? Is it necessary to earn income? Is it personal in nature? Can I prove the amount and business connection? Answering those will usually indicate if it’s deductible. And when Congress tweaks the law (as in 2017, when they suspended certain deductions or limited SALT), the IRS and courts follow those mandates strictly.

Next, let’s compare how deductions can differ based on your filing status and occupation. We touched on some of this in scenarios, but now we’ll break it down systematically to ensure you’re not missing anything based on your category as a taxpayer.

Who Gets What: Deductions by Occupation & Filing Status

Tax deductions can play out very differently depending on who you are in the eyes of the tax code. Two major factors are your filing status (like whether you’re single, married, etc.) and your occupation or income source (wage earner vs self-employed vs investor, etc.). Here’s a closer look at how these factors influence what you can deduct:

Filing Status Differences – Single vs. Married vs. Head of Household

Your filing status affects the size of your standard deduction and can also influence other deduction rules:

• Single Filers: For 2025, the standard deduction is $15,000 for singles. Single filers generally have the most straightforward situation – you either take $15k or itemize if your deductible expenses exceed that. There are no special deductions solely for being single, but singles do get one “advantage” on the SALT itemized deduction: the $10,000 SALT cap is the same for singles and married couples filing jointly, which means a single person in a high-tax state can potentially deduct up to the full $10k of their state/local taxes, whereas a married couple’s combined cap is still $10k (not $20k). In effect, married joint filers may feel the SALT cap more.

• Married Filing Jointly (MFJ): Joint filers get a $30,000 standard deduction in 2025 – exactly double the single amount. Many other deduction limits are the same or double for couples. Importantly, only one standard deduction per return: a married couple filing together cannot each claim separate standard deductions. They have to share that $30k. When it comes to itemizing: if one spouse has significant itemizable expenses (e.g., one spouse has high medical bills or charitable contributions), on a joint return those benefit the combined income. Joint filers also face combined limits, like the same $10k SALT cap per return.
  • Married couples often have larger mortgages (and therefore more interest to potentially deduct), but note the mortgage debt limit ($750k for interest) is per loan, not per person, so a jointly owned mortgage is subject to the same cap as a single owner would be. Married Filing Separately (MFS) is a special case – each spouse filing their own return. In that case, each spouse gets a standard deduction of $15,000. However, if one spouse itemizes, the other must also itemize – you can’t have one take standard and the other itemize in the same year. That rule exists to prevent a couple from doubling up tax benefits by splitting methods. Additionally, many deductions or credits are disallowed or limited for MFS filers (for example, no student loan interest deduction usually, tighter IRA deduction limits, etc.), making it a less beneficial status in many cases.

• Head of Household (HOH): This status is for unmarried individuals who pay over half the costs of maintaining a home for a qualifying person (like a child or elderly parent). HOH filers get a higher standard deduction than singles: $22,500 in 2025. That extra $7,500 is essentially a nod to the added costs of supporting dependents. Deduction rules for HOH are otherwise similar to single – the SALT cap is $10k, etc., but having dependents might lead to more itemizable expenses (for instance, higher medical bills or charitable donations, perhaps). HOH doesn’t change rules on what’s deductible, but the bigger standard deduction and different tax brackets help many single parents.

• Qualifying Widow(er): This status (available for two years after a spouse’s death if you have a dependent child) gives the same standard deduction as married filing jointly ($30,000). So, a recent widow(er) can still use the higher deduction in that transitional period.

One more aspect: being married or single can affect income phase-outs for certain above-the-line deductions. For example, the student loan interest deduction starts phasing out at lower income levels for married couples (the phase-out ranges are not exactly double the single amounts – they’re somewhat less favorable). Also, traditional IRA deduction eligibility can be affected by whether your spouse is covered by a workplace retirement plan. Always check the specific rules if you or your spouse have unique situations.

Joint vs Separate medical deductions: If you or your spouse has a lot of medical expenses, combining them on a joint return may help exceed the 7.5% AGI threshold. On separate returns, each spouse’s medical expenses are compared to their own AGI, which might make it harder to deduct if incomes are uneven. This can be a factor if one spouse has huge medical costs and the other has high income – sometimes filing separate could allow the one with medical costs to itemize more. But then the other loses standard deduction, etc. It’s a complex decision best explored with a tax advisor if relevant.

Married Filing Separately quirks: Remember, MFS filers face stricter rules: if one spouse itemizes, the other’s standard deduction is effectively $0 (they too must itemize even if they have few deductions). And certain deductions like tuition and fees deduction (when it was around) or education credits or earned income credit can’t be claimed at all if MFS. For deductions we discuss, one notable point is that the $10k SALT cap is $5,000 for each MFS return. So a married couple filing separate only gets $5k each max for SALT (the sum is still $10k, but split). This prevents a strategy of doubling SALT by filing separate.

In summary, your filing status mostly affects how big your standard deduction is and some mechanics of itemizing. It doesn’t radically change what categories you can deduct – those are mainly tied to whether you have a business, etc. However, couples should coordinate their approach (joint vs separate) to maximize deductions if they have special circumstances.

Occupation Matters: Self-Employed vs. Employee vs. Others

We’ve covered a lot about occupation in earlier sections, but here’s a clear breakdown of how different types of earners can deduct:

• W-2 Employees: As discussed, if you only have W-2 income, your deductions are relatively limited to personal itemizable things and adjustments. Job-related expenses (home office, mileage, supplies) are not deductible for you on federal returns through 2025, except for narrow exceptions (reserve military, etc.). Your focus is on maximizing any adjustments (like retirement contributions you control, HSA, student loan interest) and itemizing if applicable (home ownership, etc.).
  • One deduction some W-2 employees do get: Educator expense if you’re a teacher (we mentioned the $300 above-the-line). Another edge case: if you’re a W-2 performing artist or fee-basis government official with low income, you might deduct certain expenses on Form 2106. But in general, typical employees will mostly use the standard deduction.

• Freelancers/Self-Employed (Schedule C filers): If you work for yourself (gig workers, consultants, small side hustles, etc.), you have the broadest latitude for deductions because anything that is ordinary and necessary for your business can be written off. You’ll use Schedule C to list those expenses. This can include the wide range we saw with Alex: home office, part of your phone/internet, equipment, advertising, professional fees (legal or accounting fees for your business are deductible, by the way, whereas an individual can’t deduct the cost of personal tax prep in 2025), business travel, continuing education related to your business, and so on.
  • Additionally, you get special above-the-line deductions like the half of self-employment tax, self-employed health insurance, and retirement plan contributions. Essentially, being self-employed opens up a parallel world of deductions that W-2 earners don’t get, but only for business-related costs. Proper bookkeeping is key – in an audit, a self-employed person will need to show receipts, logs, or other evidence for each expense, since there’s no employer in between to validate them.

• Small Business Owners (Partnerships, S-Corps): Those running businesses that aren’t sole props still get to deduct business expenses, just on a separate business tax return. The deductions ultimately lower what flows through to the owners. One thing to note: some personal-like expenses can become business deductions if structured right.
  • For example, a small business owner could have the business pay for a group health plan or a group life insurance (with limits) or a company vehicle – those become business expenses, whereas a W-2 person must pay such things with personal after-tax money (and might not deduct them). However, the IRS has rules to prevent abuse (fringe benefits for S-corp >2% owners are often treated as taxable to the owner).

• Investors (Stocks, Rentals, etc.): If your “occupation” is investing or you have side investment income, the deductions work differently:
  • Rental Property Owners: Rental income is taxed, but you can deduct all the expenses of owning and managing the property on Schedule E. This includes maintenance, property taxes, insurance, repairs, HOA fees, mortgage interest on the rental, and depreciation of the property value. Many small landlords end up with a taxable loss on paper after depreciation, which can offset other income if within passive loss allowance limits (up to $25k of loss for active participants under certain income levels). So, being a landlord has its own set of generous deductions, separate from the personal itemizing world.
  • Investors in Stocks/etc.: You can’t deduct brokerage fees or investment advisory fees in 2025 (those were miscellaneous itemized deductions, also suspended). But you can deduct margin interest (investment interest expense) if you itemize, up to the amount of investment income. Also, any losses on investments can offset gains, and up to $3,000 of capital losses can offset other income – that’s technically a deduction (a loss taken against income). If you have hobby income or occasional side activity not really a business, you unfortunately cannot deduct expenses beyond that income (post-2018, hobby expenses are not deductible at all, though hobby income is taxable).
• Special Professions: A few occupations have bespoke rules:
  • Military: Active duty military moving expenses are deductible if orders require relocation (even though moves for others are not deductible). National Guard and Reserve members can deduct travel expenses to drills if over 100 miles away (even if they’re W-2, on Form 2106).
  • Artists and Performers: As noted, a qualified performing artist (with low income and certain thresholds) can deduct performing-related expenses above the line. This is an exception carved out to help struggling artists who often have a lot of out-of-pocket costs.
  • Agriculture/Farmers: They file Schedule F and have their own set of allowed deductions (feed, seed, fertilizer, farm equipment depreciation, etc.). Farming has some special provisions (like cash accounting, deducting soil and water conservation expenses) that typical businesses don’t.
  • Clergy: Ministers can’t deduct the part of income designated as a housing allowance (since it’s not taxed in the first place), and unreimbursed employee expenses would fall under the same suspension, but they do have some unique rules around self-employment tax and parsonage. Not too common, but worth noting if relevant.
  • Gig Economy workers: (Uber drivers, TaskRabbit doers, etc.) – they are basically freelancers (self-employed), so they should treat their work as a business and deduct mileage, a portion of their phone (for the app), supplies like water for passengers, etc. Many new gig workers don’t realize they can deduct these and end up overpaying taxes.

In summary, occupation largely determines which forms you use and what extra buckets of deductions you can tap into. A good rule of thumb: if you get a 1099-NEC or 1099-K for your work, you’re likely eligible to deduct expenses against that income. If you only get a W-2, your ability to deduct work-related costs is extremely limited until at least 2026.

Internal consistency matters too. The IRS often compares what you do for a living with the deductions claimed. If you’re a software engineer (W-2) claiming huge “business” expenses with no business income, that’s a mismatch. But if you’re a software engineer and you have a side consulting gig, you’d report the consulting income and related expenses on a Schedule C – that’s fine.

One more comparison point by occupation/status: Education deductions/credits vary if you’re a student. The Tuition and Fees deduction expired, so now education benefits are credits (American Opportunity Credit, etc.) and not deductions, which applies regardless of filing status but phases out by income. So those are beyond our scope of “deductions” but worth remembering as a taxpayer.

State-Level Variations: Different Rules Across the U.S.

Federal tax rules get most of the attention, but state income taxes can have their own set of deduction rules. What you can deduct (and how) on your state return might differ significantly from your federal return. Here are some common state-level variations in deductions, presented in a quick overview:

State (or Group of States)	Unique Deduction Rules in 2025
States with No Income Tax Examples: Florida, Texas, Nevada	These states don’t have a personal income tax at all, so the concept of deductions on a state return is moot – there’s no state return! However, note this affects your federal itemized deductions: if you live in a no-income-tax state, you can choose to deduct state sales taxes instead of income tax on your federal Schedule A. This can be advantageous if you made big purchases; the IRS provides optional sales tax tables plus big-ticket add-ons (like a vehicle or boat purchase) to maximize this deduction up to the $10k SALT limit.
States Requiring Federal Conformity Examples: Georgia, Oklahoma, Virginia, New Mexico, District of Columbia	Some states require you to use the same deduction method as on your federal return. If you took the standard deduction federally, you must take the state standard deduction; if you itemized federally, you must itemize state. This can cause quirks: e.g., Georgia’s state standard deduction is much smaller than the federal one. After the TCJA’s federal increase, some Georgians who lost federal itemization still had to use the small GA standard deduction, even if they had decent state itemizables, resulting in a higher GA tax bill. Virginia and Oklahoma have similar rules. New Mexico and D.C. also couple the choice, but their state standard deductions are closer to federal amounts. The key point: in these states, you don’t get to mix-and-match – your state return mirrors your federal decision.
States Allowing Independent Itemizing Examples: California, Illinois, New York	Many states (about 19 of them) let you decide independently whether to itemize on the state return, regardless of what you did federally. For instance, California and New York have their own itemized deduction structures. California’s standard deduction is much lower than federal (around $5,000 single, $10,000 joint), so a lot more Californians itemize on their state return than on their federal. However, CA also places limits: it does not allow a deduction for state income taxes on the CA Schedule CA (so you can’t deduct your CA tax on your CA return, which makes sense). CA still allows deductions for things the federal law cut: for example, unreimbursed employee expenses can still be itemized on California state returns (subject to 2% of AGI), diverging from federal law. New York similarly permits itemizing regardless of federal choice and even allows certain deductions up to old federal limits (NY still lets you deduct mortgage interest on loans up to $1 million, not capping at $750k as the feds do; NY also allows miscellaneous itemized deductions like unreimbursed expenses in some cases). If you live in a state that decouples itemization, check the state’s list of allowable deductions – you might benefit from itemizing on the state even if you took the federal standard.
States with Their Own Deductions or Credits Examples: Arizona, Wisconsin, Alabama	Each state can be quirky. Some offer deductions for things federal doesn’t. Alabama (and a few others) allow a deduction for federal income tax paid – essentially, you get to deduct on your state return the amount you paid in federal taxes (this can be a big break in those states, but it’s often limited). Wisconsin has a state-only deduction for medical insurance premiums (for people who don’t get an employer plan) that goes beyond federal rules. Arizona allows a deduction for contributions to Arizona college savings plans (a state 529 deduction), whereas the federal treatment of 529s isn’t a deduction, just tax-free growth – so that’s an extra state perk. Many states also have credits in lieu of deductions for things like property tax or rent paid (e.g., a renters credit, or homestead credit, which is not a “deduction” but helps reduce state taxes for those expenses). The key is that state tax codes often have either their own version of the federal Schedule A or a completely different approach (some states don’t even have a concept of itemizing – they might start their tax calculation from federal AGI and then have certain subtractions or additions). Always review your state’s tax instructions to see which federal deductions they accept and which they modify or add anew.
High-Tax vs Low-Tax State Considerations	In high-tax states (NY, NJ, CA, etc.), taxpayers often hit the federal SALT deduction cap. Note that while you can’t deduct beyond $10k on federal, you might still get a benefit on your state return for paying those taxes (though you’re basically just not paying double tax on them). Conversely, in some states with low taxes or unique systems (like New Hampshire or Tennessee, which until recently taxed only interest/dividends), your deductions might be minimal at state level. Pennsylvania doesn’t allow itemized deductions at all; it has a flat tax with very few deductions (only some taxpayer-friendly adjustments). Illinois doesn’t let you deduct your property taxes on the state return, but offers a tax credit for them. The variety is endless. The bottom line is: state rules can affect your strategy. For example, if your state allows itemizing when federal doesn’t, keeping track of expenses like work mileage or work tools might still save you money on the state side. Or if your state has a deduction for college tuition when federal doesn’t, don’t overlook it.
States with Post-2025 Planning	Many states conformed to the federal changes that expire after 2025. They will automatically revert if the federal law does (unless the state legislature acts). For instance, if the federal standard deduction drops in 2026 (with the return of personal exemptions and lower standard deduction), states that tied to federal definitions might also change. Some states have passed laws to decouple from certain federal changes in advance. Taxpayers should keep an eye on their state’s tax developments as 2025 ends – because what you can deduct at the state level might shift if the federal landscape shifts.

In summary, know your state: Each has its own “twist” on deductions. While we can’t cover all 50 states here, the examples above show that a deduction disallowed federally might still help you on your state return (or vice versa). Always review the instructions for the state tax forms or consult a state tax guide. Many tax software programs automatically adjust for state differences if you input all your expenses – they’ll carry to the state return where allowed.

One practical tip: If you live in a state that requires matching your federal itemizing choice, make sure to evaluate both returns together. Sometimes a small federal benefit from itemizing could yield a big state benefit or the other way around. You may choose a strategy that overall saves you more combined, even if it’s not purely optimal for the federal part alone.

Now that we’ve navigated the maze of deductions on both federal and state levels, let’s define some key terms and entities we’ve been mentioning, to ensure you’re crystal clear on the lingo.

Decoding the Tax Jargon: Key Terms & Entities Defined

Taxes come with a lot of jargon. Here are concise definitions of important terms and entities related to deductions that every taxpayer should know:

• IRS (Internal Revenue Service): The U.S. government agency responsible for tax collection and tax law enforcement. The IRS issues regulations and guidelines, processes tax returns, and can audit or penalize taxpayers for incorrect returns. When we talk about “IRS rules” or “IRS allowed/disallowed” something, we mean the guidance and enforcement coming from this agency. Essentially, they’re the referee for what’s deductible and what isn’t, based on laws set by Congress.

• U.S. Tax Court: A federal court that specializes in handling disputes between taxpayers and the IRS. If the IRS says you owe more tax (often by denying deductions or credits) and you disagree, you can petition the Tax Court. An independent judge (no jury) will review the case. Tax Court decisions interpret tax laws and can set precedents. Importantly, you don’t have to pay the disputed amount before going to Tax Court (which is why many use it). Other courts that handle tax cases include District Courts and the Court of Federal Claims (those require paying first and suing for refund). But most individual deduction fights go through Tax Court.

• Form 1040: The main individual income tax return form. Virtually every U.S. taxpayer files a Form 1040 (or a variant like 1040-SR for seniors) each year. This form summarizes your income, deductions, credits, and computes your tax or refund. Schedule A (itemized deductions) and other schedules attach to the 1040 if needed. If you’re claiming deductions, they flow onto this form either directly (like the standard deduction or certain above-line adjustments) or via attached schedules.

• Adjusted Gross Income (AGI): This is your gross income minus above-the-line deductions (adjustments) and is a key figure on your tax return. Many deduction limits or phase-outs use AGI. For example, the medical expense deduction uses 7.5% of AGI as a threshold; charitable deduction limits are a percentage of AGI; IRA contribution deductibility phases out by AGI ranges; and so on. Think of AGI as an intermediate subtotal of income after certain deductions (but before subtracting standard or itemized deduction). It’s found on line 11 of the 1040 for recent years.

• Standard Deduction: A fixed dollar amount that most taxpayers can subtract from their income if they choose not to itemize. It’s essentially a freebie deduction that requires no proof of expenses. The amount depends on filing status (for 2025: $15,000 single, $30,000 joint, $22,500 HOH, etc.). There’s an extra standard deduction if you are 65 or older and/or blind (e.g., an additional ~$1,600 per qualifying person for married, or $2,000 if single 65+). The standard deduction was made much larger by the Tax Cuts and Jobs Act of 2017, which is why itemizing became less common.

• Itemized Deductions: These are specific expense categories listed on Schedule A that you can deduct instead of the standard deduction. By “itemizing,” you detail out eligible expenses such as medical expenses, taxes paid, interest, gifts to charity, and some others. You would do this only if the total of these expenses is more than your standard deduction (or if you have to itemize due to filing separately and your spouse itemized). Schedule A is where it all gets reported. Keep in mind, certain itemized deductions have their own limits or floors (we discussed SALT, medical 7.5%, etc.). There used to be a limitation called the Pease limitation that reduced high-income folks’ itemized totals, but that is suspended through 2025.

• Schedule A: The tax form (attachment to Form 1040) used to record itemized deductions. It has sections for each type of deduction. For example, medical expenses go on lines 1-4 (with the 7.5% AGI calculation on line 3), taxes on lines 5-7 (with that $10k cap built in), interest on lines 8-10, charity on 11-14, casualty/theft losses on 15 (must be disaster-related), and some “other itemized deductions” on line 16 (things like gambling losses to the extent of winnings, etc.). If you fill out Schedule A, the total from it replaces your standard deduction on the 1040. If you take the standard, you don’t use Schedule A at all.

• Schedule C: The form for reporting profit or loss from a sole proprietorship or single-member LLC (unless you chose to file a separate business return). This is where a self-employed person lists business income and deductible business expenses. It’s essentially an income statement for your small business. Net profit from Schedule C moves to your Form 1040 (and is part of AGI). If you’re deducting business costs like in our freelancer example, they go on Schedule C line items (advertising, travel, supplies, home office via Form 8829, etc.).

• Form 2106: This form is titled “Employee Business Expenses.” Prior to 2018, many employees used Form 2106 to calculate their unreimbursed job expenses (which then flowed to Schedule A under misc. deductions). From 2018-2025, Form 2106 is mostly limited to the special job categories that can still deduct expenses: Armed Forces reservists, qualified performing artists, fee-based government officials, and individuals with disabilities for impairment-related work expenses.
  • If you’re not in those groups, you generally won’t be filing 2106 in 2025. But be aware it exists – for example, a National Guard member driving to drills far away would use 2106 to deduct mileage, lodging, etc., above the line (this ultimately shows up on Schedule 1, then Form 1040). For most folks, Form 2106 won’t be in play until/unless the miscellaneous itemized deductions come back after 2025.

• Form 1099 (Information Returns): “1099 forms” refer to a series of forms that report various types of income you received that isn’t from wages (which would be on a W-2). For instance, Form 1099-NEC reports payments to independent contractors, Form 1099-INT reports interest income, 1099-DIV for dividends, 1099-B for broker transactions (stocks sales), 1099-R for retirement distributions, and so on. Why are these relevant to deductions? Because if you receive a 1099 for income, you may need to know what expenses you can deduct against that income.
  • The classic case: a 1099-NEC for $10,000 to a freelancer – that freelancer will use Schedule C to deduct any expenses related to earning that $10k. Another example: a 1099-R for an early IRA distribution might allow you to deduct IRA contributions (not exactly – contributions are separate, but the point is the type of income on a 1099 sometimes connects to a deduction or penalty). Also, keep in mind the IRS gets copies of all 1099s, so they know your income; it’s on you to claim the associated deductions. Information returns like 1099s don’t list your deductions – that’s up to you to claim correctly.

• AGI vs. Taxable Income: We defined AGI above; Taxable Income is the result after subtracting either standard or itemized deductions (and the QBI deduction, if applicable, which is after AGI). Why does this matter? Some older rules (like the Pease itemized limit or personal exemptions) used taxable income, but currently, most calculations use AGI or Modified AGI for phase-outs. Just know that taxable income is what’s left after all deductions – that’s the number that the tax rates apply to. When we talk about “lowering your taxable income” by deductions, it means moving that final number down so you pay less tax.

These definitions should help demystify the tax talk. Remember, tax forms may sound intimidating, but each one has a specific purpose. If you’re ever unsure what a form is for or whether you need it, the IRS instructions and countless online resources (including IRS.gov) offer explanations.

Finally, to wrap up, let’s address some frequently asked questions on this topic:

FAQs – Frequently Asked Questions

Q: Do I have to itemize to deduct my mortgage interest and property taxes?
A: Yes. To deduct home mortgage interest and property tax in 2025, you must itemize deductions. If your total itemized deductions (including those expenses) don’t exceed the standard deduction, you won’t get an extra tax benefit from them.

Q: Can W-2 employees claim a home office deduction for remote work?
A: No. Regular employees cannot deduct home office expenses on their federal return in 2025 (unless you’re a qualified military reservist or performing artist under specific rules). This deduction is only for self-employed individuals until current tax law changes.

Q: Are medical and dental expenses tax deductible?
A: Yes, but only if you itemize and only the portion that exceeds 7.5% of your AGI. In other words, you can deduct large out-of-pocket medical costs above that threshold, and only if you forego the standard deduction.

Q: Is there a limit to how much I can deduct in total?
A: Yes. Some deductions have caps (e.g., at most $10,000 of state and local taxes, or 60% of AGI for charitable gifts). While there’s no single overall cap in 2025, each category of deduction has its own limits and rules.

Q: Do a lot of deductions increase my chance of an IRS audit?
A: No. Legitimate deductions by themselves don’t trigger audits. The IRS looks for unusually high or ineligible deductions relative to income. As long as your claims are within normal ranges for your situation and you have proof, you shouldn’t fear an audit simply for claiming deductions.

Q: Can I deduct student loan interest in 2025?
A: Yes. You can deduct up to $2,500 of student loan interest paid, as an above-the-line deduction. This is available even if you take the standard deduction, but it phases out at higher income levels (around $85k single or $175k joint).

Q: Can I deduct child care expenses?
A: No. Child care costs (daycare, babysitters) are not a deduction. However, you may be eligible for the Child and Dependent Care Credit, which is a separate tax credit that can reduce your tax if you have qualifying expenses and meet the work-related criteria.

Q: Are charitable donations 100% deductible?
A: Yes, if you itemize, but with limits. Cash donations to qualifying charities are deductible up to 60% of your AGI in 2025. Donations above that or certain property donations might be limited to 30% or 20% of AGI. Any excess can often carry over to future years.

Q: Will these deduction rules change after 2025?
A: Yes. Many current provisions (like the higher standard deduction and the $10k SALT cap) are set to expire after 2025. Unless new laws are passed, 2026 might see a return of some old rules (lower standard deduction, miscellaneous deductions back, etc.). But for the 2025 tax year, follow the rules we’ve discussed as they stand now.