Filing taxes can be quite challenging, and the phrase "tax deduction" often evokes images of stacks of receipts and complex computations merely for saving a small amount of money. However, here’s some positive information: you do not have to go through the process of itemizing deductions to benefit from significant tax savings and decrease your taxable income.
Each year when handling taxes, you must decide whether to opt for the standard deduction or not. itemizing your deductions . Many of us overlook the standard deduction since it’s more convenient—and for many individuals, it currently offers a superior option.
However, many people aren't aware that even if you don't itemize deductions, the IRS still allows you to reduce your tax liability with certain credits or adjustments. taxable income With specific "above-the-line" deductions. These act as guaranteed victories if you meet the qualifications.
Below are five tax deductions you can still claim even if you opt for the standard deduction as do many U.S. taxpayers.
5 Tax Breaks Available Without Itemizing Deductions
These deductions, listed on Schedule 1 of IRS Form 1040, decrease your adjusted gross income , known as AGI, could result in a reduced tax liability for you.
1. Traditional IRA contributions
Setting aside funds for your retirement is a wise decision that pays off both later and sooner. The growth of your IRA contributions isn't taxed until withdrawal, allowing you to postpone tax payments. Additionally, putting money into a traditional IRA might make your contribution deductible this year (in contrast, contributions to a Roth IRA use post-tax dollars, so they aren’t eligible for deduction).
Anyone who invests funds into a traditional IRA It might be eligible for this above-the-line deduction. However, the sole limitation on claiming IRA contribution deductions happens when either you or your spouse has a retirement plan through your workplace, like a 401(k). Under those circumstances, certain income thresholds could restrict your capability to deduct these IRA contributions.
Tax tip
You have up to the tax filing deadline on April 15, 2025, to make contributions to a traditional IRA for the year 2024. This can be one of the limited methods available to decrease your tax liability once the year has ended.
To express it differently, if you don’t If you have a retirement plan through your employer (and your spouse does not), there are no income restrictions for deducting your IRA contributions.
In 2024 and 2025, you're permitted to contribute up to $7,000 annually ($8,000 if you're aged 50 or above). If your earnings fall under the phaseout threshold, you will likely receive a tax deduction equivalent to the total contribution amount.
The following are the income caps for claiming deductions on contributions to a traditional IRA when you (or your spouse) participate in an employer-sponsored retirement plan, applicable for the years 2024 and 2025. (Refer to the IRS guidelines for computing these amounts.) adjusted gross income (AGI) modified for traditional IRAs (MAGI) .)
Income limits for deducting contributions to a Traditional IRA when you're also covered by a workplace retirement plan.
| Filing status | Adjusted gross income for 2024 taxes (modified version) | Adjusted gross income for 2025 after modifications | Deduction amount |
|---|---|---|---|
| Unmarried, as the head of a household, or married but filing separately (did not reside with your spouse throughout the year) | Up to $77,000 | Up to $79,000 | Full deduction |
| $77,000 to $87,000 | $79,000 to $89,000 | Partial deduction | |
| $87,000+ | $89,000+ | No deduction | |
| Filing as married couples where both are covered under a workplace retirement plan | Up to $123,000 | Up to $126,000 | Full deduction |
| $123,000 to $143,000 | $126,000 to $146,000 | Partial deduction | |
| $143,000+ | $146,000+ | No deduction | |
| Filing as married couples where both partners are part of an employment benefit plan | Up to $230,000 | Up to $236,000 | Full deduction |
| $230,000 to $240,000 | $236,000 to $246,000 | Partial deduction | |
| $240,000+ | $246,000+ | No deduction | |
| Filing as married but living apart from one’s spouse for some part of the year | Up to $10,000 | Up to $10,000 | Partial deduction |
| $10,000+ | $10,000+ | No deduction | |
| Source: IRS |
Keep in mind that, should you (along with your spouse if married) be not If you're covered by an employer retirement plan, your contributions remain fully tax-deductible irrespective of how much you earn.
2. HSA contributions
If you have a high-deductible health plan (HDHP), contributing to a health savings account can help you save both immediately and down the road. Contributions to an HSA are tax-deducatable, your funds grow without being taxed until withdrawn, and when used for eligible medical costs, these withdrawals remain untaxed.
The allowable deductions for Health Savings Account (HSA) contributions in 2024 (which would apply to tax filings made in 2025) are as follows:
- Up to $4,150 for individual recipients
- As much as $8,300 for family units
- Individuals aged 55 and above can contribute an additional $1,000.
Tax tip
You have until the April 15, 2025, tax filing deadline to make contributions to your Health Savings Account (HSA) for the 2024 tax year. This is among the rare methods available to decrease your taxes even after the year has concluded.
The allowable deductions for Health Savings Account (HSA) contributions in 2025 (applicable to tax filings made in 2026) are as follows:
- Up to $4,300 for individual recipients
- Up to $8,550 for family units
- Individuals aged 55 and above can contribute an additional $1,000.
In order to make HSA contributions, you need to be part of a qualifying HDHP and should not have coverage from another group plan.
Tax tip
Should your employer make contributions to your Health Savings Account, those funds will count towards your yearly contribution cap.
3. Tax deduction for student loan interest
While student loan repayments might hurt, there's a bright side: you can claim a deduction for up to $2,500 in interest paid annually on both federal and private student loans.
In order to be eligible for this complete deduction, you have to:
- have covered interest payments on a student loan for you, your spouse, or a dependant.
- have removed the loan to cover eligible educational costs.
- have a modified adjusted gross income (or MAGI) below the limits (see below).
- Should not be considered as another person's dependent.
Below are the income thresholds for claiming the student loan interest deduction when filing your 2024 taxes in 2025 (refer to the IRS guidelines for more details). determining Modified Adjusted Gross Income for the student loan interest deduction ):
Income thresholds for deducting student loan interest in 2024
| Filing status | Adjusted gross income for 2024 after modifications | Deduction amount |
|---|---|---|
|
Unmarried, individual filer, head of household, or eligible widow(er) |
$0 to $80,000 |
Full deduction |
|
$80,000 to $95,000 |
Partial deduction |
|
|
$95,000+ |
No deduction |
|
|
Married filing jointly |
$0 to $165,000 |
Full deduction |
|
$165,000 to $195,000 |
Partial deduction |
|
|
$195,000 or more |
No deduction |
|
|
Married filing separately |
N/A |
No deduction |
| Source: IRS . |
4. Educator expense deduction
It's quite typical for teachers to spend their own funds on classroom materials. Luckily, qualifying educators may claim a deduction for at least part of these expenses.
Teachers, instructors, guidance counselors, and school principals who work at least 900 hours annually are eligible for this tax reduction, which can be as high as $300 per person (or $600 for married couples where both partners are involved in education).
This educator expense deduction covers job-associated costs like educational tech, textbooks, supplies, training programs, and other essential items.
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5. Self-employment deductions
What about freelancers, gig workers, and entrepreneurs? If you're self-employed, there are multiple business tax deductions To assist in reducing your taxable income on Schedule C.
However, when you're completing your tax return and you input your net business earnings from Schedule C into it, Form 1040 , you might also be eligible for certain above-the-line deductions (which should be entered on Form 1040’s Schedule 1).
The three key points are:
- The self-employment tax deduction works as follows: If you're self-employed, you must cover both the employer and employee shares of Social Security and Medicare taxes. However, half of this tax amount can be deducted.
- Contributions to your SEP IRA, SIMPLE IRA, or solo 401(k) plans typically offer tax deductions.
- If you pay for health insurance but do not qualify for coverage through your employer, you have the option to deduct 100% of the premium costs for yourself, your spouse, or your dependents.
Bottom line
Paying taxes isn't enjoyable, yet reducing expenses can be rewarding. You don't require complex itemized deductions to lower your tax liability.Above-the-line deductions are accessible regardless of whether you choose the standard deduction or opt for itemizing your deductions, simplifying the process of retaining more of your well-deserved income.
These deductions can accumulate rapidly, be it for repaying student loans, saving for retirement, or handling healthcare costs. Spending a short time verifying your eligibility might result in savings of hundreds or even thousands of dollars in taxes.