When filing taxes, you can choose between claiming the standard deduction or itemizing your deductions. However, recent tax law changes have significantly reduced the number of Americans who itemize.
In fact, only about 10% of taxpayers now itemize, down from nearly 30% before the Tax Cuts and Jobs Act of 2017.
However, regardless of whether you itemize or not, there are still “above-the-line” deductions that all taxpayers can claim to reduce their taxable income. These deductions can be found in Part II of Schedule 1 on Form 1040.
Here are 13 easy tax deductions that don’t require itemizing:
1. IRA Contributions
Depending on your Modified Adjusted Gross Income (MAGI) and whether you have access to a workplace retirement plan, contributions to a traditional IRA may be tax-deductible.
For the 2022 tax year, phase-out limits begin at $68,000 and end at $78,000 for single filers and heads of households. For joint filers, phase-outs range from $109,000 to $129,000.
2. HSA Contributions
For the 2022 tax year, you can deduct contributions to a Health Savings Account (HSA) up to:
- $3,650 for single filers
- $7,300 for families
- An extra $1,000 if you’re 55 or older
3. Self-Employed Retirement Plan Contributions
If you’re self-employed and contribute to a Solo 401(k), SEP IRA, or SIMPLE IRA, you can deduct contributions from your taxable income. The IRS allows deductions for both salary deferrals and employer contributions, making this a valuable deduction for business owners.
4. Student Loan Interest
If you have student loans, you may be able to deduct up to $2,500 in interest payments.
Income limits apply:
- Full deduction if your MAGI is under $70,000 (single) or $140,000 (joint).
- Partial deduction if your MAGI is under $85,000 (single) or $170,000 (joint).
5. Certain Alimony Payments
Alimony payments are no longer deductible for divorces finalized after December 31, 2018. However, if your divorce agreement was established before this date, you may still be able to claim this deduction.
6. Unreimbursed Educator Expenses
Teachers, principals, and school counselors can deduct up to $300 in unreimbursed classroom expenses (books, supplies, software, etc.). If both spouses are educators and file jointly, the deduction increases to $600.
7. Half of Self-Employment Tax
If you’re self-employed, you are responsible for paying 15.3% in self-employment taxes (covering both employer and employee portions). However, you can deduct half of this tax as an above-the-line deduction.
8. Health Insurance Premiums for the Self-Employed
If you’re self-employed, you can deduct health insurance premiums you pay for yourself and your family, even if you don’t itemize deductions.
9. Moving Expenses for Active-Duty Military
Most people can’t deduct moving expenses anymore. However, active-duty military personnel who move due to permanent station orders can still claim a deduction for qualified moving expenses.
10. Business Expenses for Performing Artists, Reservists, and Certain Government Officials
Most people must itemize to deduct business expenses. However, performing artists, reservists, and fee-based public officials can claim an above-the-line deduction for certain work-related expenses. Since eligibility requirements vary, consulting a tax professional is recommended.
11. Early Withdrawal Penalties on Savings
If you withdraw money early from a CD (Certificate of Deposit) or other savings instrument and incur a penalty, you can deduct the full penalty amount from your taxable income.
12. Archer MSA Contributions
Although Archer Medical Savings Accounts (MSAs) were discontinued in 2007, if you still have one, you can deduct qualified contributions.
13. Lesser-Known Deductions
Several less common tax deductions include:
- Reforestation expenses
- Portion of the value of Olympic or Paralympic medals
- Legal fees for certain discrimination claims
If you’re unsure about whether you qualify for a deduction, consult a CPA or tax professional for guidance.
By taking advantage of these deductions, you can significantly lower your taxable income without itemizing your deductions!
