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Knowing what you can deduct on your taxes each year is important for reducing your tax liability. Some common deductions, like the mortgage interest tax deduction, are well known, but others may not be so familiar. If you want to benefit from itemized deductions, these are the details you should know.
For help on your taxes and other financial questions, consider working with a financial advisor.
How Tax Deductions Work
A tax deduction allows you to subtract certain expenses from your taxable income, leaving you with a smaller tax bill.
It is important to note the difference between a deduction vs. a tax credit.
- A tax credit directly reduces your tax bill.
- A deduction reduces your tax bill indirectly.
For example, if you have a $2,000 bill and you take a $1,000 credit, you now owe just $1,000. A $1,000 tax deduction lowers your taxable income by that amount.
The higher your marginal tax rate, the more valuable a tax deduction will be. For example, 22% of $1,000 is more than 12% of $1,000.
Home Mortgage Interest Deduction
The most commonly available federal income tax deduction is the home mortgage interest deduction.
For a while, both mortgage interest and credit card interest were tax-deductible, but a 1986 tax reform eliminated the deduction for credit card interest. If you’re a renter, the mortgage interest tax deduction might be one factor that you consider when deciding whether to rent or buy.
Standard Deduction
The first thing to decide when filing your taxes is whether you’ll take the standard deduction or itemize your deductions.
The IRS gives a standard deduction that knocks a little off your taxable income. The deduction you can claim depends on whether you’re filing as an individual or jointly with your spouse.
The size you can claim also depends on your age, your spouse’s age (if applicable) and your income(s). If you think your deductions will exceed the standard deduction, you’ll probably want to itemize.
For the tax year 2026, these standard deductions apply: 1
| Filing Status | 2026 Deduction |
|---|---|
| Single | $15,750 |
| Joint | $32,200 |
| Heads of household | $24,150 |
Tax-Deductible Expenses
The IRS provides a list of all tax credits and deductions for individuals and businesses.
If you’re filing your tax return yourself, you can review the list of tax deductions and identify the ones that apply to you. If you’re using tax preparation software, it will walk you through potential tax-deductible expenses to ensure you claim everything you can.
The tax deductions relevant to your situation will depend on what you spent and how you earned your money during the tax year.
- If you’re a teacher who spent money out-of-pocket on classroom expenses, you can deduct up to $350 in 2026. 2
- Work from home? You may be able to deduct some of the expenses involved in setting up and running your home office. 3
- Got student loans? You may be able to deduct up to $2,500 of the interest you paid. 4
If you’ve filed before, it’s worth going through the list anew.
The more complex your financial situation, the more likely you’ll need help minimizing your tax bill, particularly if you own a business. Whether this comes in the form of an accountant or a tax software program is largely a matter of personal preference and budget.
Tax-Deductible Donations
Charitable giving is a way to reduce your tax liability while supporting your favorite causes.
Donations to qualified charities are tax-deductible. If you have a high net worth, regular giving of assets such as money, stock and art is a tried-and-true way to lower taxes.
To qualify for the deduction, the charity must be eligible. You must also be able to document that you received no goods or services in exchange for your donation. Providing donors with the proper documentation is standard practice for any charity worth its salt.
If you’re concerned that you might not get the paperwork you need, make sure to ask the charity questions before making your donation.
How a Financial Advisor Can Help With Tax-Deductible Expenses and Decisions
Deciding between the standard deduction and itemizing, identifying which deductions apply to your situation and structuring charitable giving can all meaningfully affect your tax bill.
A financial advisor can help you work through these decisions with a clearer view of your full financial picture. They often coordinate with a tax preparer or accountant to ensure the strategy is properly reflected on your return.
Decide Between the Standard Deduction vs. Itemizing
An advisor can help in several ways as you determine whether to take the standard deduction instead of itemizing.
First, they will review your specific deductions, including the following.
- Mortgage interest
- State and local taxes
- Charitable giving
- Medical expenses
They will then calculate whether itemizing actually yields a lower tax bill than the standard deduction, given your filing status and income for the year.
Real-Life Example
A married couple filing jointly has $28,000 in combined itemized deductions for 2026, just under the $32,200 standard deduction.
An advisor reviews their giving plans for the year and suggests combining two years of charitable contributions into one tax year. This pushes their itemized total above the standard deduction, allowing them to capture a larger overall tax benefit over the two-year period.
Identify Specific Deductions
An advisor can go beyond the general IRS list of credits and deductions to identify which ones apply specifically to your work situation, business structure or recent life changes.
These may include deductions like the educator expense deduction, home office deduction or student loan interest deduction. All of these carry their own eligibility rules and limits.
Real-Life Example
A self-employed consultant who recently started working from a dedicated home office is unsure whether the space qualifies for the home office deduction.
An advisor walks through the IRS requirements for exclusive and regular business use. They help calculate the deduction and coordinate with the client’s tax preparer to ensure it is claimed correctly.
Structure Charitable Giving
An advisor can help you choose a tax-efficient way to give. This may include donating appreciated stock rather than cash to avoid capital gains tax, or funding a donor-advised fund in a high-income year to take the deduction now, while the actual gifts to charities are made gradually.
Real-Life Example
A retiree wants to donate $20,000 to a cause she cares about and currently holds appreciated stock worth that amount with a much lower cost basis.
An advisor recommends donating the stock directly rather than selling it, as well as cash. This allows her to deduct the full fair market value while avoiding the capital gains tax she would have owed on the sale.
Plan for a Tax Refund or Unexpected Tax Bill
An advisor helps you build a plan for an expected refund before it arrives, or for a larger-than-expected tax bill. They typically do this by adjusting withholding or setting aside funds in advance.
Real-Life Example
A client typically receives a $4,000 refund each year and spends it without much planning.
This year, an advisor helps her redirect future refunds toward an emergency fund and retirement contributions. They also adjust her W-4 withholding so less of her own money goes to the IRS throughout the year.
Bottom Line
Tax liability can be tough to predict. That’s one reason to keep a well-funded emergency fund in case your tax bill is bigger than you anticipate.
It’s important to go into tax season with a plan not only for how you will pay your taxes but also for what to do with your refund. Will you pay off debt or save for retirement? Maybe you’ll invest in your professional development.
Having a plan for your tax refund increases the chances you’ll put it to good use rather than letting it bleed into your regular spending.
Tax Season Tips
- For help with taxes and other financial questions, consider working with a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Another important part of your finances is your housing costs. Use SmartAsset’s mortgage calculator to see what you might owe if you buy a new home.
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