Salaried employees get a stack of federal tax deductions and exclusions, most of which run automatically through payroll or require nothing more than a benefits election. In 2026, the standard deduction alone shields between $16,100 and $32,200 of wages from federal income tax depending on filing status.1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Pre-tax retirement contributions, a health savings account, flexible spending accounts, and the value of employer-paid health coverage can push the sheltered amount tens of thousands of dollars higher. The tax deductions available to salaried employees fall into four practical groups: the standard deduction you get for free, pre-tax payroll elections you control, employer benefits that never appear as taxable wages, and itemized deductions that only pay off if they clear the standard deduction threshold.
The Standard Deduction You Get Automatically
If you don’t itemize, your taxable income drops by a flat amount tied to your filing status. No receipts, no proof, no extra forms. For tax year 2026, the standard deduction is $16,100 for single filers or married filing separately, $32,200 for married filing jointly, and $24,150 for head of household.1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 These figures reflect increases in the One Big Beautiful Bill Act, signed in July 2025, and are indexed for inflation under the underlying statute.2Office of the Law Revision Counsel. 26 USC 63 – Taxable Income Defined
Workers who turn 65 by the last day of the tax year get an additional standard deduction of $2,050 (single) or $1,650 per qualifying spouse on a joint return.1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 For 2025 through 2028, there is also a separate $6,000 senior deduction for those 65 and older, or $12,000 for a couple where both qualify, available whether or not you itemize. That extra deduction phases out above $75,000 of modified adjusted gross income for single filers and $150,000 for joint filers, and couples must file jointly to claim it.3Internal Revenue Service. One, Big, Beautiful Bill Act – Tax Deductions for Working Americans and Seniors
Pre-Tax Retirement Contributions
Contributing to a workplace retirement plan is the single most powerful move most salaried workers have for reducing current-year taxable income. Traditional contributions come out of your paycheck before federal income tax is calculated, so the money never shows up as taxable wages on your W-2.
401(k), 403(b), 457, and the Thrift Savings Plan
For 2026, you can defer up to $24,500 of salary into a traditional 401(k), 403(b), governmental 457, or the federal Thrift Savings Plan.4Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 That amount reduces taxable income dollar for dollar. Earn $85,000 and defer $24,500, and your federal taxable wages drop to $60,500 before anything else is applied.
Workers age 50 and older can add $8,000 in catch-up contributions, bringing the total to $32,500. A higher catch-up applies at ages 60 through 63: $11,250 instead of $8,000, for a maximum deferral of $35,750.4Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 The elective deferral limit is set by statute and adjusted for inflation each year.5Office of the Law Revision Counsel. 26 USC 402 – Taxability of Beneficiary of Employees Trust
One important distinction. Roth 401(k) contributions do not reduce your taxable income now, because they come out of after-tax pay. Only traditional (pre-tax) contributions lower your current-year tax bill.
Traditional IRA
The 2026 contribution limit for a traditional IRA is $7,500, with another $1,100 catch-up for workers age 50 and older.4Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 Whether that contribution is deductible depends on income and workplace plan coverage. If neither you nor your spouse participates in a workplace retirement plan, the full contribution is deductible regardless of income. If you do, the deduction phases out at higher income levels.
Pre-Tax Health and Dependent Care Accounts
Health and dependent-care accounts funded through payroll avoid federal income tax, Social Security tax, and Medicare tax. That triple savings on the same dollar is why these are among the cleanest tax breaks available to a salaried worker.
Health Savings Account
If your employer offers a high-deductible health plan, you can contribute to a health savings account. For 2026, the limit is $4,400 for self-only coverage and $8,750 for family coverage, with a $1,000 catch-up at age 55 and older. HSA rules are set out in the federal tax code, with the IRS updating dollar limits annually.6Office of the Law Revision Counsel. 26 USC 223 – Health Savings Accounts
HSA balances roll over indefinitely and can be invested. Withdrawals for qualified medical expenses are never taxed. Deductible going in, tax-free growth, tax-free out for medical costs: three distinct tax advantages in the same account.
Health Flexible Spending Account
A health FSA lets you set aside pre-tax dollars for out-of-pocket medical expenses even without a high-deductible plan. The maximum salary reduction in 2026 is $3,400. Most FSA balances follow a use-it-or-lose-it rule, though employers can offer either a $660 carryover or a 2.5-month grace period. You cannot fund both an HSA and a general-purpose health FSA in the same year, but a limited-purpose FSA covering only dental and vision is compatible with an HSA.
Dependent Care FSA
If you pay for childcare or dependent care so you can work, a dependent care FSA shelters up to $7,500 per year for married couples filing jointly, or $3,750 for married filing separately.7FSAFEDS. Dependent Care FSA Eligible expenses include daycare, before- and after-school programs, and day camp for children under 13.
Employer Benefits That Never Hit Your W-2
Several benefits provided by your employer are excluded from taxable wages by law. You claim nothing; the exclusion simply happens.
The largest is employer-sponsored health insurance. The share of premiums your employer pays on your behalf is excluded from gross income under federal law.8Office of the Law Revision Counsel. 26 USC 106 – Contributions by Employer to Accident and Health Plans If your employer contributes $8,000 toward your family plan, that $8,000 never appears as wages. Your own share, when deducted on a pre-tax basis through a cafeteria plan, also avoids income and payroll taxes.
Commuter benefits are tax-free up to $340 per month for transit passes or vanpooling, plus a separate $340 per month for qualified parking in 2026.9Internal Revenue Service. Publication 15-B (2026), Employers Tax Guide to Fringe Benefits That is up to $4,080 a year in transit and another $4,080 in parking kept out of taxable wages. Many employers offer these through pre-tax payroll deductions even without subsidizing the cost.
Under Section 127 of the federal tax code, your employer can pay up to $5,250 per year toward your education expenses without that amount being added to your wages. The courses do not need to be related to your current job, and the exclusion covers tuition, fees, and books. Amounts above $5,250 become taxable unless they qualify under a separate working-condition fringe benefit rule tied directly to your job.
When Itemizing Beats the Standard Deduction
You can itemize instead of taking the standard deduction when your qualifying expenses add up to more than the standard amount. With the 2026 standard deduction at $16,100 for single filers and $32,200 for joint filers, itemizing only wins when a few larger categories combine to clear that threshold.
State and Local Taxes
The SALT deduction covers state income taxes, local property taxes, and state sales taxes. The One Big Beautiful Bill Act raised the SALT cap from $10,000 to $40,000 for 2025 and beyond ($20,000 for married filing separately), with the cap phasing down for modified AGI above $500,000 ($250,000 if married filing separately).10Internal Revenue Service. How to Update Withholding to Account for Tax Law Changes for 2025 For a homeowner in a high-tax state, SALT alone can be the deduction that pushes itemizing past the standard amount.
Home Mortgage Interest
You can deduct interest on up to $750,000 of mortgage debt ($375,000 if married filing separately) used to buy, build, or substantially improve your home. Mortgages originated before December 16, 2017 keep the older $1 million limit.11Internal Revenue Service. Publication 936 (2025), Home Mortgage Interest Deduction
Charitable Contributions
Cash donations to qualifying public charities are generally deductible up to 50% of your adjusted gross income. Contributions to certain private foundations and other organizations are capped at 30% of AGI.12Internal Revenue Service. Charitable Contribution Deductions You must have written acknowledgment from the charity for any single donation of $250 or more.
Make Sure Your Withholding Matches
Deductions and exclusions only produce the right tax outcome if your paycheck withholding reflects them. Your employer must furnish your W-2 by January 31 following the end of the tax year, showing gross wages, taxable wages, and taxes withheld. Compare it against your final pay stub, particularly Box 12, where pre-tax retirement contributions and health account amounts are coded.
Returns are generally due April 15. An extension buys you until October 15 to file, but it does not extend the time to pay; any tax owed is still due in April. To avoid an underpayment penalty, your withholding should cover at least 90% of your current-year tax liability or 100% of the prior year’s tax (110% if your prior-year adjusted gross income exceeded $150,000). Review your W-4 after any raise, job change, marriage, divorce, or new dependent, and again whenever you change a 401(k), HSA, or FSA election, since each of those shifts the taxable wages your employer is withholding against.