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TAXES Tax Deductions You're Probably Missing (A Guide for ... 2026-02-27 · 5 min read · tax deductions · tax savings · W-2 employee taxes

Tax Deductions You're Probably Missing (A Guide for Regular Employees)

taxes 2026-02-27 · 5 min read tax deductions tax savings W-2 employee taxes tax tips lower your tax bill

The US tax code has hundreds of deductions built in to reduce your tax liability — but you have to know they exist to claim them. Most people overpay because they either don't itemize when they should or don't know about above-the-line deductions available without itemizing.

Understanding: Standard Deduction vs. Itemizing

After the 2017 tax law changes, the standard deduction jumped significantly:

About 90% of taxpayers now use the standard deduction because it's larger than their itemized deductions would be. But there are deductions — called "above-the-line" deductions or "adjustments to income" — that you get regardless of whether you itemize or take the standard deduction.

Above-the-Line Deductions (No Itemizing Required)

These reduce your adjusted gross income (AGI) directly. Everyone should check these.

1. Student Loan Interest

You can deduct up to $2,500 in student loan interest paid per year. The deduction phases out at higher incomes ($75,000-$90,000 single, $155,000-$185,000 married). Your loan servicer sends a Form 1098-E showing how much interest you paid.

2. HSA Contributions

If you have a High-Deductible Health Plan (HDHP) and contribute to a Health Savings Account (HSA), those contributions are deductible — even if made by you directly outside payroll. Payroll-deducted HSA contributions are already pre-tax and show up on your W-2, but direct contributions you made to your HSA are an additional deduction.

2024 limits: $4,150 individual / $8,300 family / +$1,000 if 55+.

3. IRA Contributions (Traditional IRA)

If you or your spouse aren't covered by a workplace retirement plan, traditional IRA contributions are fully deductible up to $7,000 ($8,000 if 50+) in 2024.

If you are covered by a workplace plan, the deductibility phases out at higher incomes — but check the thresholds, as many middle-income earners still qualify for a partial deduction.

4. Self-Employed Health Insurance

If you're self-employed (or a partner or S-corp owner), you can deduct 100% of health, dental, and vision insurance premiums for yourself and your family. This is an above-the-line deduction.

5. Educator Expenses

K-12 teachers can deduct up to $300 in classroom supplies (or $600 for joint filers who are both educators) spent out of pocket. Not huge, but easy to miss.

6. Alimony Paid (Pre-2019 Divorces)

For divorce agreements finalized before January 1, 2019, alimony payments you make are deductible. Post-2018 divorces eliminated this deduction.

Commonly Missed Itemized Deductions

If your total itemized deductions exceed the standard deduction, these can help:

Medical Expenses Over 7.5% of AGI

You can deduct medical expenses that exceed 7.5% of your AGI. On a $70,000 AGI, that threshold is $5,250. Anything above that is deductible.

Qualified expenses include: co-pays, prescriptions, dental and vision care, glasses and contacts, medical equipment, long-term care insurance premiums, and mileage driven for medical appointments.

For most people this doesn't exceed the threshold, but high medical expense years (surgery, chronic illness, major dental work) can change the math.

State and Local Taxes (SALT) — Capped at $10,000

You can deduct up to $10,000 in state and local taxes (income taxes or sales taxes, plus property taxes). High-tax-state residents often hit this cap.

Mortgage Interest and Property Taxes

Homeowners with mortgages — particularly those with large mortgages or high property taxes — often benefit from itemizing because of:

Charitable Contributions

Cash donations to qualified nonprofits are deductible. Non-cash donations (clothing to Goodwill, furniture to Habitat for Humanity) are also deductible at fair market value.

For non-cash donations, keep the receipt and estimate value honestly. The IRS has a used clothing valuation guide (or use the charity's valuation guide). Don't overinflate — this is a common audit trigger.

Investment-Related Deductions

Investment Interest Expense

If you borrow money to invest (e.g., margin loans), the interest is deductible up to the amount of your net investment income.

Capital Losses

When investments lose money, those losses can offset gains — and up to $3,000 per year of excess losses can offset ordinary income. Any remaining losses carry forward indefinitely. (See our capital gains tax article for more on this.)

Home Office Deduction (For Self-Employed and Business Owners)

Regular W-2 employees cannot claim a home office deduction since the 2017 tax law changes. But if you're self-employed, a freelancer, or own a business:

Regular method: Deduct the percentage of your home used exclusively for business (home office square footage ÷ total home square footage). Apply that percentage to mortgage interest/rent, utilities, internet, and depreciation.

Simplified method: $5 per square foot of home office space, up to 300 square feet = up to $1,500 deduction.

The home office must be used regularly and exclusively for business. It can't be your dining table that you also eat at.

Retirement Contributions (Especially Often Maxed Late)

Beyond traditional IRAs, check whether you're maximizing:

What People Miss Most Often

Not claiming student loan interest: Easy to forget, especially if you have auto-pay and don't think about it.

Not tracking medical miles: If you drive to doctors, dentists, or therapists regularly, those miles add up. IRS rate is 21 cents/mile for medical travel in 2024.

Not deducting gambling losses: If you report gambling winnings (you should), you can deduct gambling losses up to the amount of your winnings. Requires itemizing.

Forgetting prior-year state refund is taxable: If you got a state tax refund last year and you itemized in that year (claiming state taxes paid), the refund is taxable income this year. Easy to miss.

Not deducting job-search expenses for unemployed: Certain job-search expenses in your current occupation can be deductible.

Getting Professional Help

Tax deductions are worth knowing about, but for complex situations — self-employment income, rental properties, stock options, major life events — a CPA or enrolled agent typically pays for themselves. They know the current rules, catch things you'd miss, and can represent you if you're ever audited.

The IRS Free File program (IRS.gov) provides free federal tax filing for people with adjusted gross income under $79,000. Free tax preparation assistance is also available through VITA (Volunteer Income Tax Assistance) sites in many communities.