What You Can Still Deduct

Comprehensive guide to current tax deductions and how to maximize them

Back to Taxes & Deductions

Understanding Tax Deductions in 2024

Tax deductions reduce your taxable income, potentially saving you thousands of dollars. However, tax reform has significantly changed the deduction landscape. Many deductions that were once commonplace are now limited or eliminated. Understanding what you can still deduct—and how to maximize those deductions—is crucial for effective tax planning.

Standard vs. Itemized Deductions

2024 Standard Deduction:

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

You can only benefit from itemizing if your total itemized deductions exceed these amounts. This is why "bunching" deductions into alternating years has become a popular strategy.

Retirement Contributions (Above-the-Line Deductions)

These deductions reduce your Adjusted Gross Income (AGI) regardless of whether you itemize:

Traditional IRA Contributions

  • Contribution limit: $7,000 ($8,000 if age 50+)
  • Deadline: April 15, 2025 for 2024 tax year
  • Deductibility: Depends on income and whether you're covered by employer plan
  • Phase-out ranges for 2024:
    • Single with workplace plan: $77,000 - $87,000
    • Married filing jointly (both have plans): $123,000 - $143,000
    • Married filing jointly (one has plan): $230,000 - $240,000 for non-covered spouse

401(k), 403(b), and 457 Plans

  • Employee contribution limit: $23,000 ($30,500 if age 50+)
  • Deadline: December 31, 2024 (must be through payroll)
  • Reduces taxable income: Dollar-for-dollar reduction
  • Strategy: Max out early in year or increase contributions now through year-end

Self-Employed Retirement Plans

  • SEP IRA: Up to 25% of net self-employment income (max $69,000)
  • Solo 401(k): $23,000 employee + up to 25% employer (max $69,000 total)
  • SIMPLE IRA: $16,000 ($19,500 if age 50+)
  • Deadline: Varies by plan type (SEP can be made until tax return deadline including extensions)

Health Savings Account (HSA)

One of the most powerful tax-advantaged accounts available:

  • Triple tax advantage: Deductible contribution, tax-free growth, tax-free withdrawals for medical expenses
  • 2024 limits: $4,150 individual / $8,300 family (plus $1,000 if age 55+)
  • Deadline: April 15, 2025 for 2024 contributions
  • Eligibility: Must be enrolled in high-deductible health plan (HDHP)
  • No "use it or lose it": Unlike FSA, funds roll over indefinitely
  • Investment option: Can invest HSA funds for long-term growth

HSA Tax Savings Calculator

Your HSA Tax Savings:

$913

Federal income tax savings from HSA contribution

Plus additional FICA tax savings of $317 if contributed through payroll

Itemized Deductions

Remember: You can only use these if your total itemized deductions exceed the standard deduction.

Medical Expenses

  • Threshold: Only expenses exceeding 7.5% of AGI are deductible
  • Qualifying expenses:
    • Doctor and dentist fees
    • Hospital and nursing home care
    • Prescription medications
    • Medical equipment and supplies
    • Glasses, contacts, hearing aids
    • Mental health services
    • Addiction treatment programs
    • Medical conference costs for chronic illness
    • Mileage: 22 cents per mile for medical travel
  • Strategy: Bunch medical procedures and expenses into one year to exceed threshold
  • Not deductible: Cosmetic procedures (unless medically necessary), health club dues, non-prescription drugs

Medical Expense Strategy

If your AGI is $100,000, you need more than $7,500 in medical expenses to get any deduction. Consider:

  • Scheduling elective procedures in high-expense years
  • Prepaying January premiums in December
  • Buying needed medical equipment before year-end
  • Getting prescription refills in December

State and Local Taxes (SALT)

  • Overall limit: $10,000 total ($5,000 if married filing separately)
  • Includes:
    • State and local income taxes
    • State and local sales taxes (either/or with income taxes)
    • Real estate property taxes
    • Personal property taxes on vehicles
  • Strategy: Choose between income and sales tax (use IRS calculator)
  • Not deductible: Federal income taxes, transfer taxes, fees for services

Mortgage Interest

  • Limit: Interest on up to $750,000 of mortgage debt ($375,000 if married filing separately)
  • Legacy loans: $1 million limit applies if mortgage taken before December 15, 2017
  • Deductible:
    • Mortgage interest on primary residence
    • Mortgage interest on one second home
    • Points paid on purchase of primary residence
    • Late payment charges on mortgage payments
  • Not deductible: HELOC interest unless used for home improvements, reverse mortgage interest until actually paid

Charitable Contributions

One of the most flexible and valuable deductions remaining:

Cash Donations

  • Limit: Up to 60% of AGI
  • Documentation: Bank record or written acknowledgment from charity
  • $250+ donations: Must have written acknowledgment
  • $500+ non-cash: Must file Form 8283
  • $5,000+ non-cash: Requires qualified appraisal

Non-Cash Donations

  • Limit: Up to 30% of AGI for appreciated property held more than one year
  • Appreciated stock: Deduct full fair market value, avoid capital gains tax
  • Property donations: Must be used by charity for tax-exempt purposes
  • Vehicle donations: Limited to actual sale price in most cases
  • Clothing/household items: Must be in "good used condition or better"

Qualified Charitable Distributions (QCD)

  • Eligibility: Age 70½ or older
  • Limit: Up to $105,000 per year
  • Benefits: Satisfies RMD, not included in AGI, doesn't require itemizing
  • Requirements: Must go directly from IRA to qualified charity

Bunching Strategy for Charitable Giving

If you typically give $8,000 per year to charity, you may not exceed the standard deduction. Instead, consider:

  • Year 1: Give $16,000 (two years' worth), itemize deductions
  • Year 2: Give nothing, take standard deduction
  • This approach can save $1,000+ in taxes over two years
  • Use a donor-advised fund to make large contribution but distribute over time

Investment Expenses and Losses

Capital Losses

  • Offset gains: Capital losses offset capital gains dollar-for-dollar
  • Ordinary income: Up to $3,000 in excess losses can offset ordinary income
  • Carryforward: Unused losses carry forward indefinitely
  • Wash sale rule: Cannot deduct loss if you repurchase same security within 30 days

Investment Interest Expense

  • Deductible: Interest paid on margin loans used to purchase taxable investments
  • Limit: Cannot exceed net investment income
  • Not deductible: Interest on loans to purchase tax-exempt securities

Business Deductions (Self-Employed & Small Business Owners)

Home Office Deduction

  • Eligibility: Regular and exclusive business use of part of home
  • Simplified method: $5 per square foot (max 300 sq ft = $1,500)
  • Regular method: Deduct actual expenses proportionate to business use percentage
  • Deductible expenses: Mortgage interest, property taxes, utilities, repairs, insurance, depreciation

Business Vehicle Expenses

  • Standard mileage: 67 cents per mile for 2024
  • Actual expenses: Gas, repairs, insurance, depreciation, lease payments
  • Choose one: Cannot switch methods for same vehicle
  • Documentation: Mileage log with date, destination, business purpose
  • Commuting: Not deductible (home to office)

Equipment and Technology

  • Section 179: Immediate expensing up to $1,220,000
  • Bonus depreciation: Additional first-year deduction
  • Computers and software: Fully deductible business equipment
  • Cell phones and service: Business use percentage deductible

Self-Employment Tax Deduction

  • Automatic: Deduct 50% of self-employment tax
  • Above-the-line: Reduces AGI even if taking standard deduction
  • No documentation needed: Calculated automatically on Schedule SE

Health Insurance (Self-Employed)

  • 100% deductible: Premiums for yourself, spouse, dependents
  • Above-the-line deduction: Reduces AGI
  • Limitations: Cannot exceed net self-employment income
  • Cannot claim if: Eligible for employer-sponsored plan (yours or spouse's)

Education Deductions and Credits

Student Loan Interest Deduction

  • Maximum deduction: $2,500 per year
  • Above-the-line: Available even if taking standard deduction
  • Phase-out ranges:
    • Single: $80,000 - $95,000
    • Married filing jointly: $165,000 - $195,000
  • Eligible loans: Qualified education loans for yourself, spouse, or dependent

American Opportunity Tax Credit

  • Maximum credit: $2,500 per student (40% refundable)
  • Eligibility: First four years of post-secondary education
  • Phase-out: $80,000-$90,000 single / $160,000-$180,000 married
  • Qualified expenses: Tuition, fees, course materials

Lifetime Learning Credit

  • Maximum credit: $2,000 per tax return (not per student)
  • Eligibility: Any post-secondary education or courses to acquire job skills
  • Phase-out: $80,000-$90,000 single / $160,000-$180,000 married
  • Not refundable: Can only reduce tax liability to zero

⚠️ Cannot Claim Both

You cannot claim the American Opportunity Credit and Lifetime Learning Credit for the same student in the same year. Choose the one that provides the greater tax benefit.

Deductions No Longer Available

Tax reform eliminated or limited many popular deductions:

❌ No Longer Deductible (for most taxpayers)

  • Miscellaneous itemized deductions: Investment fees, tax preparation fees, unreimbursed employee expenses
  • Moving expenses: Unless you're active-duty military
  • Home equity loan interest: Unless used for home improvements
  • Job-related education: No longer deductible as employee business expense
  • Job search expenses: Previously deductible miscellaneous expense
  • Alimony payments: For divorce agreements after December 31, 2018
  • Personal casualty losses: Only federally declared disaster areas
  • Theft losses: Only federally declared disaster areas

Special Deductions and Situations

Educator Expenses

  • Deduction: Up to $300 ($600 if married, both educators)
  • Above-the-line: Available regardless of itemizing
  • Eligible expenses: Books, supplies, equipment, COVID-19 protective items, professional development
  • Eligibility: K-12 teacher, instructor, counselor, principal, or aide working at least 900 hours

Jury Duty Pay

  • Deduction: If you give jury pay to your employer
  • Reason: Employers who pay you during jury duty may require you to turn over jury pay
  • Above-the-line: Reduces AGI

Penalty on Early Withdrawal of Savings

  • Deductible: Penalty for early withdrawal from CD or other time deposits
  • Above-the-line: Reported on Form 1099-INT

Maximizing Your Deductions

Timing Strategies

1. Bunching Deductions

Concentrate deductible expenses into alternating years to exceed the standard deduction:

  • Prepay January mortgage payment in December (13 payments in one year)
  • Make two years of charitable contributions in one year
  • Schedule medical procedures in high-expense years
  • Prepay property taxes (if not limited by AMT)

2. Year-End Acceleration

If you're already exceeding the standard deduction, accelerate expenses:

  • Pay January's mortgage payment in December
  • Make charitable contributions before December 31
  • Schedule and pay for medical procedures before year-end
  • Pay estimated state taxes in December rather than January

3. Income and Deduction Matching

Optimize timing based on your tax bracket:

  • Higher income year: Maximize deductions
  • Lower income year: May benefit more from standard deduction
  • Consider multi-year planning for major expenses

Documentation Best Practices

What to Keep

  • ☐ Receipts for all deductible expenses: Especially those over $75
  • ☐ Bank and credit card statements: Supporting documentation
  • ☐ Charity acknowledgment letters: Required for donations over $250
  • ☐ Form 1098: Mortgage interest, student loan interest
  • ☐ Medical expense records: Receipts, EOBs, mileage logs
  • ☐ Property tax statements: From county or mortgage company
  • ☐ Business expense records: Receipts, invoices, contracts
  • ☐ Mileage logs: Date, destination, business purpose, miles
  • ☐ Home office records: Square footage, utility bills, repairs
  • ☐ Investment records: Purchase dates, cost basis, sale information

How Long to Keep Records

  • 3 years: Minimum retention for most tax records
  • 6 years: If you underreported income by 25% or more
  • 7 years: If you claimed loss from worthless securities or bad debt
  • Indefinitely: Tax returns themselves, property purchase records, retirement account records

Take Action Before December 31

Many deductions require action before year-end. Review this guide, calculate which deductions apply to your situation, and take action now. The tax you save will be worth the effort. Consider working with a tax professional if your situation is complex or if you have questions about specific deductions.