The Taxation Cuts and Jobs Act was the biggest overhaul to the U.S. taxation code in decades, and it made some meaning changes to the taxation deductions that are available. Many tax deductions were kept intact, merely others were modified, and some were eliminated entirely.

At that place are too several dissimilar types of taxation deductions, and these can get a bit confusing. For case, some tax deductions are simply available if you choose to itemize deductions, while others tin be taken even if yous opt for the standard deduction. With all that in mind, here's a rundown of what Americans need to know about tax deductions as the 2022 tax filing season opens.

Person filling out a 1040 tax form with calculator and money nearby.

Image source: Getty Images.

What is a tax deduction?

The term "tax deduction" simply refers to any item that tin can reduce your taxable income. For instance, if you pay $2,000 in tax-deductible pupil loan involvement, this means your taxable income volition be reduced by $2,000 for the twelvemonth in which you paid the interest.

At that place are several different types of taxation deductions. The standard deduction is one that every American household is entitled to, regardless of their expenses during the yr. Taxpayers can merits itemizable deductions instead of the standard deduction if it benefits them to do and so. Above-the-line deductions, which are also known equally adjustments to income, can be used by households regardless of whether they catalog or not. And finally, at that place are a few other items that don't actually fit into one of these categories but are still tax deductions.

The standard deduction

When filling out their taxation returns, American households can choose to itemize certain deductions (we'll get to those in a chip), or they tin accept the standard deduction -- whichever is more beneficial to them.

The Tax Cuts and Jobs Act nearly doubled the standard deduction. Before the increment, about seventy% of U.S. households used the standard deduction, but now information technology is estimated that roughly 95% of households will use it. For the 2022 and 2022 tax years, hither are the standard deduction amounts.

Taxation Filing Status

2018 Standard Deduction

2019 Standard Deduction

Married Filing Jointly

$24,000

$24,400

Head of Household

$18,000

$18,350

Single

$12,000

$12,200

Married Filing Separately

$12,000

$12,200

Data source: IRS.

To be perfectly clear, unless your itemizable deductions exceed the standard deduction amount for your filing status, you lot'll exist meliorate off using the standard deduction.

Itemized deductions

The alternative to taking the standard deduction is choosing to itemize deductions. Itemizing means deducting each and every deductible expense you incurred during the taxation yr.

For this to exist worthwhile, your itemizable deductions must be greater than the standard deduction to which you are entitled. For the vast majority of taxpayers, itemizing will not be worth it for the 2022 and 2022 tax years. Not only did the standard deduction about double, but several formerly itemizable taxation deductions were eliminated entirely, and others have get more than restricted than they were before.

With that in mind, here are the itemizable tax deductions you may exist able to take reward of when you fix your tax render in 2019.

Mortgage involvement

The mortgage interest deduction is among the tax deductions that still exist after the passage of the Revenue enhancement Cuts and Jobs Human action, but for many taxpayers it won't be quite as valuable equally it used to be.

Specifically, homeowners are allowed to deduct the involvement they pay on as much every bit $750,000 of qualified personal residence debt on a first and/or second home. This has been reduced from the former limit of $ane million in mortgage chief plus up to $100,000 in dwelling equity debt.

On that note, the deduction for interest on home disinterestedness debt has technically been eliminated for the 2022 tax twelvemonth and beyond. However, if the dwelling disinterestedness loan was used to substantially amend the dwelling house, the debt is considered a qualified residence loan and can therefore be included in the $750,000 cap.

Charitable contributions

This is perhaps the to the lowest degree inverse of the major tax deductions. Contributions to qualified charitable organizations are still deductible for tax purposes, and in fact the deduction has go a scrap more generous for the ultra-charitable. U.S. taxpayers tin can now deduct charitable donations of equally much equally threescore% of their adjusted gross income (AGI), upward from fifty% of AGI.

One negative change to note: If you donate to a college in commutation for the power to buy able-bodied tickets, that is no longer considered a charitable donation for revenue enhancement purposes.

Medical expenses

The IRS allows taxpayers to deduct qualified medical expenses above a certain pct of their adjusted gross income. The Tax Cuts and Jobs Act reduced this threshold from 10% of AGI to vii.v%, but simply for the 2022 and 2022 taxation years. And then when you lot file your 2022 taxation return this year, yous can deduct qualified medical expenses exceeding 7.v% of your AGI. For instance, say your AGI is $50,000, and you incur $5,000 in qualified medical expenses. The threshold yous need to cross earlier yous tin first deducting those expenses is 7.5% of $fifty,000, or $three,750. Your expenses are $1,250 above the threshold, so that'due south the amount y'all tin deduct from your taxable income.

Still, the medical deduction threshold is gear up to render to ten% of AGI starting with the 2022 taxation yr. So when you lot file your 2022 tax return in 2020, y'all'll use this higher per centum to decide whether y'all authorize for the deduction.

Land income tax or land sales taxation

The IRS gives taxpayers the choice to claim either their state and local income tax or their state and local sales tax as an itemized deduction. Naturally, if your state doesn't have an income revenue enhancement, the sales tax deduction is the way to go. On the other manus, if your state does have an income revenue enhancement, then deducting that will generally relieve you more money than deducting sales tax.

I quick note: If you choose the sales tax deduction, yous don't necessarily need to save each and every receipt to document how much sales revenue enhancement you've paid. The IRS provides a handy reckoner you lot tin can use to easily determine your sales tax deduction.

Property taxes

If you pay property tax on a dwelling house, car, gunkhole, airplane, or other personal property, you can count it toward your itemized deductions. This deduction and the deduction for income or sales taxation are collectively known as the SALT deduction -- that is, the "state and local taxes" deduction.

There's one major caveat when information technology comes to the Salt deduction. The Tax Cuts and Jobs Act limits the total amount of country and local taxes you can deduct -- including property taxes and sales/income tax -- to $10,000 per year. So if y'all live in a loftier-tax country or just own some valuable holding that y'all pay tax on, this could significantly limit your ability to deduct these expenses.

The bottom line on itemizable deductions

That wraps up the major itemizable deductions that are still available nether the newly revised U.S. tax lawmaking. As you can see, there aren't many of them, and some of those that remain -- such as the medical expense and Common salt deductions -- are quite limited.

For itemizing to be worth your while, you need some combination of these deductions to exceed your standard deduction. It's easy to see why most taxpayers won't itemize going forward.

As a personal example, my married woman and I accept traditionally itemized our deductions. However, in 2022 we'll have about $nine,000 in deductible mortgage interest, a few thousand dollars in charitable contributions, and most $6,000 in state and local taxes, including belongings taxes. In previous years, this would have made itemizing well worth it, merely information technology looks like we'll be using the standard deduction when we file our return in 2019.

Above-the-line tax deductions

While you need to itemize deductions to have reward of the deductions I discussed in the previous section, at that place are quite a few revenue enhancement deductions that yous can use regardless of whether you catalog or take the standard deduction.

These are known every bit adjustments to income and are more commonly referred to as in a higher place-the-line tax deductions. And with a few exceptions, most of these survived the recent tax reform unscathed. Here are the above-the-line deductions you may be able to have advantage of in 2019.

Tax-deferred retirement contributions

If you contribute to any taxation-deferred retirement accounts, you can generally deduct the contributions from your taxable income, even if y'all don't itemize. This includes:

  • Contributions to a qualified retirement plan such every bit a traditional 401(thou) or 403(b). For 2018, the maximum elective deferral by an employee is $18,500, and for the 2022 tax year this is increasing to $19,000. If you're 50 or older, these limits are raised by $6,000 each year.
  • Contributions to a traditional IRA. The IRA contribution limit is $5,500 for the 2022 tax year and $6,000 for 2019, with an additional $ane,000 catch-up contribution allowed if you're 50 or older. However, it's important to signal out that if you or your spouse is covered by a retirement plan at work, your ability to take the traditional IRA deduction is income-restricted.
  • If you are self-employed, your contributions to a SEP-IRA, SIMPLE IRA, or Solo 401(1000) are by and large deductible, unless they are fabricated on an after-tax (Roth) ground.

Health savings account (HSA) and flexible spending account (FSA) contributions

If you contribute to a taxation-advantaged healthcare savings account (HSA), your contributions are tax-deductible up to the IRS's contribution limits. The 2022 contribution limit is $three,450 for those with single healthcare policies or $half dozen,900 those with family coverage. In 2019, these limits will increase to $3,500 and $7,000, respectively. There'southward also a $ane,000 take hold of-upwards allowance if you lot're 55 or older.

An HSA has many unique features. Most chiefly, you tin withdraw your HSA funds tax-gratis from your business relationship at whatever time to cover qualifying medical expenses. That ways you can become a tax pause on both your contributionand your withdrawal -- a perk that no IRA or 401(m) offers. Once you turn 65, you can withdraw money for non-healthcare purposes for any reason without paying a penalty -- though you lot'll have to pay income tax on withdrawals that don't get toward qualifying medical expenses. Additionally, unlike a flexible spending account (more on this below), an HSA allows you to deport over and invest your money year after year.

You can participate in an HSA if all of the post-obit apply:

  1. You lot're covered by a loftier-deductible health plan (HDHP)
  2. You're not covered by another health plan that is not an HDHP
  3. You're not enrolled in Medicare
  4. You're not claimed as a dependent on someone else's tax return

If you don't authorize for an HSA, you may yet be able to contribute to a flexible spending account, or FSA. The FSA contribution limit is $two,650 in 2022 and $2,700 in 2019. While FSAs aren't quite as beneficial as HSAs, they can even so shelter a skilful amount of your income from taxation. Beware that y'all can but gyre over up to $500 in leftover funds to the post-obit yr, so for the near function, FSAs are "use it or lose it" accounts.

Dependent care FSA contributions

There's some other blazon of flexible spending account that's designed to help families pay for kid care expenses. Married couples filing jointly can set aside equally much equally $five,000 per twelvemonth on a pre-tax footing, and single filers can set aside as much every bit $2,500 to exist spent on qualifying dependent care expenses.

Notation that you tin can't use a dependent intendance FSA and the popular Child and Dependent Care tax credit for the same expenses. However, with child care expenses running well into the five-effigy range in many parts of the land, it's fair to say that many parents should exist able to take advantage of both kid care tax breaks.

Teacher classroom expenses

If you're a full-time K-12 teacher and have paid for any classroom expenses out of pocket, you can deduct up to $250 of those expenses as an above-the-line tax deduction. Potential qualifying expenses could include classroom supplies, books you employ in teaching, and software yous purchase and use in your classroom, just to name a few.

Pupil loan interest

The IRS allows taxpayers to take an above-the-line deduction for up to $2,500 in qualifying educatee loan involvement per year. To qualify, you must be legally obligated to pay the involvement on the loan -- essentially this ways the loan is in your name. Y'all likewise cannot be claimed as a dependent on someone else's tax return, and if you choose the "married filing separately" condition, it will disqualify you from using this deduction.

One important thing to know: Your lender will only ship you a tax course (Class 1098-East) if you paid more than $600 in educatee loan interest throughout the yr. If y'all paid less than this corporeality, y'all are yet eligible for the deduction, but you'll need to log into your loan servicer'south website to get the required information.

Half of the self-employment revenue enhancement

There are some first-class revenue enhancement benefits available to cocky-employed individuals (nosotros'll hash out some in the side by side section), but one downside is the self-employment revenue enhancement.

If y'all're an employee, you pay half of the taxation for Social Security and Medicare, while your employer pays the other half. Unfortunately, if y'all're self-employed, you accept to pay both sides of these taxes, which is collectively known as the self-employment tax.

I silver lining is that you tin can deduct 1-half of the self-employment tax as an above-the-line deduction. While this doesn't completely offset the boosted burden of paying the tax, it certainly helps to lessen the sting.

Home office deduction

If yous use a portion of your home exclusively for business, you may be able to take the home office deduction for expenses related to its use. The IRS has two main requirements you need to encounter. First, the space you claim as your office must be used regularly and exclusively for business. In other words, if you regularly ready your laptop in your living room where you also scout Tv every night, yous shouldn't claim a habitation office deduction for the space.

2nd, the space you claim must be the main identify you lot conduct business. Generally, this means you're cocky-employed, simply there are some circumstances in which the IRS allows employees to accept the home part deduction also.

There are 2 ways to calculate the deduction. The simplified method allows y'all to deduct $5 per square foot, upward to a maximum of 300 foursquare anxiety of dedicated office infinite. The more complicated method involves deducting the bodily expenses of operating in that infinite, such as the proportion of your housing payment and utility expenses that are represented by the space, every bit well every bit expenses relating to the maintenance of your home part. Y'all are free to use whichever method is more beneficial to you.

Other tax deductions

In addition to the itemizable and above-the-line deductions I've discussed, in that location are a few revenue enhancement deductions that deserve separate mention, because they more often than not apply only if you take specific types of income.

  • Investment losses:If you sold any investments at a loss, you can apply these losses to get-go any capital gains income that you take. Short-term losses must get-go exist used to offset short-term gains, while long-term losses must get-go exist applied to long-term gains. And if your investment losses exceed your gains for the year, you tin can utilise up to $3,000 in remaining net losses to reduce your other taxable income for the year. If there are however losses remaining, you can behave them frontwards to future years.
  • Laissez passer-through income:This deduction is a product of the Tax Cuts and Jobs Human activity and is designed to help small-business owners save coin. U.S. taxpayers can now use as much as twenty% of their pass-through income every bit a deduction. This includes income from an LLC, South-Corporation, or sole proprietorship, besides as partnership income and income from rental real estate, just to name some of the potential sources. The deduction is not available to sure taxpayers whose income comes from "specified service businesses" (more than details hither) and exceeds sure thresholds.
  • Gambling losses:You tin can deduct gambling losses on your taxes, but only to the extent that you take gambling winnings. In other words, if none of your income came from gambling, you lot can't deduct the $500 yous lost on your last trip to Las Vegas.
  • Other self-employed deductions:Finally, if y'all're cocky-employed, there are a ton of concern deductions you lot may be able to have reward of. You can deduct business organisation-related travel expenses, office supplies and equipment, and health insurance premiums from your self-employment income, only to name a few potential deductions. And don't forget almost the special retirement accounts for the cocky-employed that we covered earlier.

Deductions you can't use anymore

Unfortunately, no discussion of tax deductions would be consummate without mentioning those that didn't survive the Tax Cuts and Jobs Human action, the recently implemented overhaul of the U.Southward. tax code. Hither are some of the tax deductions that were available before the 2022 revenue enhancement year but aren't effectually anymore:

  • The tuition and fees revenue enhancement deduction -- although the American Opportunity Credit and Lifetime Learning Credit are still available.
  • The deduction for casualty and theft losses, unless the losses were caused by a federally declared disaster.
  • Unreimbursed employee expenses. If you had to pay for work uniforms, for example, y'all're out of luck.
  • The in a higher place-the-line deduction for job-related moving expenses, although war machine personnel may however be able to use it.
  • Employer-subsidized parking and transportation reimbursement are no longer deductible.
  • Tax preparation costs. The costs of hiring an accountant to do your taxes, or of using tax-prep software, used to be deductible -- just they aren't anymore.
  • All other deductions that previously fell nether the IRS'south "miscellaneous deductions" category accept been eliminated.

Revenue enhancement deductions vs. tax credits: What's the deviation?

Yous may observe that some familiar tax breaks haven't been included in this discussion. That'south because many of the nearly popular tax breaks are tax credits, not deductions. Here are just a few popular tax credits that yous may be able to merits:

  • The Earned Income Taxation Credit, or EITC
  • The American Opportunity Credit
  • The Lifetime Learning Credit
  • The Child Tax Credit
  • The Child and Dependent Care Credit
  • The Retirement Savings Contributions Credit, or "Saver'south Credit"

At that place's a large difference between tax deductions and tax credits. Tax deductions lower the amount of your income that volition be subject field to taxation. For example, if your income is $80,000, and you have $xx,000 worth of tax deductions, your taxable income is $threescore,000. If you're single, this would reduce your tax bill by over $4,000, based on the 2022 tax brackets.

On the other hand, tax credits lower the corporeality of tax y'all have to pay, dollar for dollar. So if your taxable income translates to a 2022 federal income tax of $10,000, and you have $three,000 in taxation credits, you'll only take to pay $7,000.

If you're unsure about taking any of these taxation deductions

As a concluding point, information technology's of import to mention that this guide is a broad overview of the various tax deductions that may be available to yous, and some of them accept quite a fleck of fine print fastened to them that nosotros couldn't maybe cover in one article. For example, the IRS publication that discusses the home office deduction is 34 pages long all past itself.

Some revenue enhancement deductions are pretty straightforward. If y'all donate money to a qualified clemency and get a receipt, for case, you can exist pretty certain that you lot'll qualify for the charitable contributions deduction. However, if there's any doubt in your mind almost your ability to take any of these deductions, be sure to consult a qualified tax professional for communication.