What Expenses Are Tax Deductible? Itemized, Above-the-Line, Business

Expenses that are tax deductible fall into two broad groups: itemized deductions you claim on Schedule A instead of taking the standard deduction, and above-the-line adjustments that lower your income whether you itemize or not. The itemized side covers qualifying medical costs, state and local taxes, mortgage interest, and charitable gifts. The above-the-line side covers things like student loan interest, HSA and IRA contributions, educator expenses, and self-employed health insurance. Self-employed filers get a separate set of business deductions on Schedule C. Almost everything personal—commuting, political donations, everyday clothing, most fines—is not deductible at all.

Before working through any list, know what you’re comparing against. For tax year 2026, the standard deduction is $16,100 for single filers and married filing separately, $32,200 for married filing jointly and qualifying surviving spouses, and $24,150 for head of household.¹ Filers who are 65 or older or blind get an additional standard deduction on top.² Itemizing only helps when your qualifying expenses beat that floor. If your mortgage interest, property taxes, and charitable gifts add up to $28,000 and you file jointly, the standard deduction wins and the receipts don’t matter. If they add up to $35,000, itemizing gives you $2,800 more in deductions.

Itemized Deductions on Schedule A

Medical and Dental Expenses

You can deduct medical and dental costs, but only the portion above 7.5% of your adjusted gross income. If your AGI is $80,000, the first $6,000 of spending doesn’t count; only the amount above that comes off your taxable income.³ The high floor means the deduction usually only helps in years with a major medical event.

Qualifying costs include doctor and dentist visits, prescriptions, eyeglasses, hearing aids, diagnostic equipment, and transportation to appointments. Health insurance premiums paid with after-tax dollars count. So do home modifications made for medical reasons, such as installing a wheelchair ramp.³

State and Local Taxes (SALT)

The SALT deduction lets you deduct a combination of property taxes and either state income taxes or state sales taxes. The Tax Cuts and Jobs Act capped this at $10,000 for years. The One, Big, Beautiful Bill Act raised the cap to $40,000 starting in 2025, with a 1% annual inflation adjustment, bringing the 2026 cap to roughly $40,400 for most filers and $20,200 for married filing separately. If you live in a high-tax state, that higher cap may push your total deductions above the standard deduction threshold for the first time in years.

Mortgage Interest

Homeowners can deduct interest on up to $750,000 of mortgage debt used to buy, build, or substantially improve a primary or secondary residence. The cap is $375,000 for married filing separately. Mortgages taken out before December 16, 2017, get a higher limit of $1 million.⁴ Each January, your lender sends Form 1098 showing the exact interest paid; that number transfers to Schedule A. Points paid at closing to lower your rate are also deductible, either in the year paid or spread over the life of the loan.

One important limit: interest on a home equity loan is only deductible when the borrowed funds were used to buy, build, or substantially improve the home securing the loan. A home equity loan spent on a vacation or credit card payoff generates no deduction.

Charitable Contributions

Donations to qualifying nonprofits are deductible when you itemize. Cash gifts are deductible up to 60% of your AGI; gifts of appreciated property like stock are generally limited to 30% of AGI.⁵ Donated clothing, furniture, or vehicles count at fair market value, not original cost.

Any single gift of $250 or more needs a written acknowledgment from the charity stating the amount, describing anything you got in return, and giving a good-faith estimate of that thing’s value.⁵ Smaller gifts still need a bank record or receipt. Auditors look hard at non-cash donations because the values are subjective.

Above-the-Line Deductions Anyone Can Take

Some deductions reduce your income before the standard-versus-itemizing choice even comes up. They lower your adjusted gross income directly, which can also help you qualify for other tax benefits that phase out at higher AGI levels. Claim them on Schedule 1.

Student Loan Interest

You can deduct up to $2,500 in student loan interest per year without itemizing.⁶ The deduction phases out at higher incomes: single filers lose it entirely at $100,000 of modified AGI for 2026, joint filers at $205,000. If your servicer collected $600 or more in interest, you’ll get Form 1098-E with the figure.⁷

Educator Expenses

K-12 teachers, counselors, principals, and aides who work at least 900 hours in a school year can deduct up to $300 in unreimbursed classroom expenses. Two qualifying spouses filing jointly can deduct up to $600 combined. Books, supplies, computer equipment, and professional development courses all qualify.⁸

HSA and IRA Contributions

Contributions to a Health Savings Account are deductible without itemizing, provided you’re enrolled in a qualifying high-deductible health plan. The 2026 limits are $4,400 for self-only coverage and $8,750 for family coverage.⁹

Traditional IRA contributions are also above the line. The 2026 limit is $7,500, up from $7,000 in 2025, plus a $1,100 catch-up contribution at age 50 or older.¹⁰ If you or your spouse is covered by a workplace retirement plan, the IRA deduction phases out above certain income levels.¹¹ Roth IRA contributions are never deductible.

Self-Employed Health Insurance

A self-employed person with net profit can deduct 100% of the premiums paid for medical, dental, and vision insurance covering themselves, a spouse, and dependents. This is an above-the-line deduction on Schedule 1, not Schedule A. It’s unavailable for any month you were eligible for a subsidized employer plan through a spouse’s job or another source.¹²

Business Deductions for the Self-Employed

Freelancers, independent contractors, and sole proprietors deduct business expenses on Schedule C. The statutory test is that the expense must be ordinary (common in your line of work) and necessary (helpful to the business).¹³ These deductions reduce your self-employment tax as well as your income tax, so each legitimate dollar works twice.

Home Office

If part of your home is used exclusively and regularly for business, you can deduct a share of your housing costs. The simplified method allows $5 per square foot up to 300 square feet, capping the deduction at $1,500.¹⁴ The regular method requires calculating the actual business-use percentage of your home and applying it to rent or mortgage interest, utilities, insurance, and repairs. It’s more paperwork but often produces a larger number.

Vehicle Expenses

For a personal vehicle used in business, you pick one of two methods each year. The 2026 standard mileage rate is 72.5 cents per mile.¹⁵ The actual-expense method tracks gas, oil changes, insurance, registration, and depreciation, then deducts the business-use percentage. Mileage is simpler; actual expenses often favor expensive vehicles or heavy business use. Either way, you need a contemporaneous log showing dates, destinations, and business purpose.

Equipment and Section 179

Business equipment like computers, machinery, and office furniture is normally depreciated over several years. Section 179 lets you deduct the full purchase price in the year the item goes into service, up to $2,560,000 for 2026. The deduction begins phasing out once total qualifying purchases exceed $4,090,000 in a single year.¹⁶

Qualified Business Income (Section 199A)

Eligible self-employed individuals and pass-through business owners can deduct up to 20% of their qualified business income. Recent legislation extended this deduction beyond its original 2025 expiration. It’s available in full for single filers with 2026 taxable income up to $201,750 and joint filers up to $403,500. Above those thresholds the deduction phases down, and additional limits based on wages paid and business property apply. Service businesses like consulting, law, and accounting face stricter phase-outs than other kinds of businesses.

Expenses You Cannot Deduct

The tax code broadly disallows deductions for personal, living, and family expenses unless a specific section says otherwise.¹⁷ The categories that most often trip people up:

Commuting between home and your regular workplace is personal, however long the drive. Taking business calls on the way doesn’t change that. Trips to a temporary work location expected to last a year or less can be deductible, but the daily commute itself never is.¹⁸
Political contributions to candidates, parties, campaigns, and lobbying efforts are never deductible, including when made through a business.¹⁹
Everyday clothing and grooming don’t qualify, even for jobs with strict appearance standards. Only uniforms or protective gear unsuitable for regular wear count.
Traffic tickets, parking fines, and other penalties paid to a government are specifically disallowed.

Records to Keep

The IRS doesn’t ask for proof when you file, but expects you to produce it if questions come up later. Good records are what separates a deduction that survives review from one that gets thrown out with penalties attached.

Several documents arrive automatically each January. Form 1098 from your mortgage lender shows interest paid.⁴ Form 1098-E from your student loan servicer shows loan interest.⁶ Charities send written acknowledgments for gifts of $250 or more. Beyond those, keep receipts, cancelled checks, and card statements for every expense you deduct.

Self-employment records need more discipline. Track expenses as they happen rather than reconstructing them in April. A mileage log, home office measurements, and organized business receipts make Schedule C easier to fill out and easier to defend. Keep tax records at least three years after filing. If you underreported income by more than 25%, the IRS has six years to audit, so hold onto records longer when the stakes are higher.²⁰

Penalties for Claiming What You Shouldn’t

Honest mistakes usually mean paying the correct tax plus interest. Carelessness and fraud are different. The accuracy-related penalty is 20% of the underpaid amount when the IRS finds negligence or a substantial understatement, and it jumps to 40% for gross valuation misstatements on donated property.²¹ The civil fraud penalty is 75% of the underpayment attributable to fraud, and once the IRS establishes fraud for any portion, it presumes the whole underpayment is fraudulent unless you prove otherwise.²² Deliberate evasion can move from civil penalties to criminal prosecution and imprisonment.

The safe rule is to claim only what you can document. When something is a close call, leave it off or get professional guidance before filing.

1
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
2
Internal Revenue Service. Topic No. 551, Standard Deduction
3
Internal Revenue Service. Publication 502 (2025), Medical and Dental Expenses
4
Internal Revenue Service. Publication 936 (2025), Home Mortgage Interest Deduction
5
Office of the Law Revision Counsel. 26 USC 170 – Charitable, Etc., Contributions and Gifts
6
Internal Revenue Service. Topic No. 456, Student Loan Interest Deduction
7
Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education
8
Internal Revenue Service. Topic No. 458, Educator Expense Deduction
9
Internal Revenue Service. Revenue Procedure 2025-19, 2026 HSA Inflation Adjusted Items
10
Internal Revenue Service. Notice 25-67, 2026 Retirement Plan and IRA Limits
11
Internal Revenue Service. IRA Deduction Limits
12
Internal Revenue Service. Instructions for Form 7206 (2025), Self-Employed Health Insurance Deduction
13
Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses
14
Internal Revenue Service. Simplified Option for Home Office Deduction
15
Internal Revenue Service. 2026 Standard Mileage Rates
16
Internal Revenue Service. Depreciation Expense Helps Business Owners Keep More Money
17
Office of the Law Revision Counsel. 26 US Code 262 – Personal, Living, and Family Expenses
18
Internal Revenue Service. Publication 463, Travel, Gift, and Car Expenses
19
Internal Revenue Service. Nondeductible Lobbying and Political Expenditures
20
Internal Revenue Service. How Long Should I Keep Records?
21
Office of the Law Revision Counsel. 26 US Code 6662 – Imposition of Accuracy-Related Penalty on Underpayments
22
Office of the Law Revision Counsel. 26 US Code 6663 – Imposition of Fraud Penalty