If you’re a W-2 employee, your main tax deductions come from three places: pre-tax contributions your employer takes out of your paycheck, above-the-line adjustments on Schedule 1, and either the standard deduction or itemized deductions on Schedule A. The list is shorter than it was a decade ago, but used together these tools can still take a real bite out of what you owe.
Unreimbursed Job Expenses Are Permanently Off the Federal Return
Before getting into what you can claim, one thing to clear up: if you’re hoping to write off mileage, a home office, professional dues, or supplies your employer didn’t reimburse, you can’t. The Tax Cuts and Jobs Act suspended those miscellaneous itemized deductions starting in 2018, and the One Big Beautiful Bill Act, signed in mid-2025, made the elimination permanent. Tax prep fees, investment advisory fees, job-search costs, and unreimbursed employee business expenses are gone from the federal return for good.
A narrow group can still file Form 2106: Armed Forces reservists, qualified performing artists, fee-basis state or local government officials, and workers with impairment-related expenses.1Internal Revenue Service. Form 2106 – Employee Business Expenses Everyone else needs to push their employer for an accountable reimbursement plan rather than counting on a tax deduction to recover the money.
Pre-Tax Payroll Contributions
The single biggest tax-reduction tool for most W-2 employees isn’t technically a deduction at all. It’s the pre-tax money your employer pulls out of your paycheck before your W-2 wages are calculated. That income never shows up as taxable to begin with.
401(k), 403(b), 457(b), and TSP
For 2026, you can defer up to $24,500 of your salary into a workplace retirement plan. If you’re 50 or older, an $8,000 catch-up raises the ceiling to $32,500. Workers aged 60 through 63 get a larger catch-up of $11,250, bringing their total to $35,750.2Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
HSA Through Payroll
If you’re enrolled in a qualifying High Deductible Health Plan and contribute to a Health Savings Account through payroll, those dollars skip both income tax and FICA. The 2026 limits are $4,400 for self-only coverage and $8,750 for family coverage, plus a $1,000 catch-up if you’re 55 or older.3Internal Revenue Service. 2026 Inflation Adjusted Items for Health Savings Accounts
Between a maxed-out 401(k) and a family HSA, an employee can knock more than $29,000 off taxable wages before touching a single line on the actual tax return.
Above-the-Line Deductions on Schedule 1
Above-the-line deductions reduce your gross income to arrive at Adjusted Gross Income. You claim them on Schedule 1 of Form 1040 whether you take the standard deduction or itemize.4Internal Revenue Service. 2025 Schedule 1 (Form 1040) – Additional Income and Adjustments to Income A lower AGI also helps you qualify for credits that phase out at higher income levels, so the benefit compounds.
Traditional IRA Contributions
You can put up to $7,500 into a Traditional IRA in 2026, plus a $1,100 catch-up at age 50 or older. Whether that contribution is deductible depends on whether you or your spouse is covered by a workplace retirement plan and how much you earn. If neither of you is covered, the full contribution is deductible regardless of income. If you are covered, the deduction phases out over these Modified AGI ranges:
- Single or Head of Household: $81,000 to $91,000
- Married Filing Jointly, contributing spouse covered: $129,000 to $149,000
- Married Filing Jointly, only the other spouse covered: $242,000 to $252,000
- Married Filing Separately: $0 to $10,000
Above the top of the range, you can still contribute but the deduction disappears.2Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
HSA Contributions Outside Payroll
If you fund an HSA with a personal check instead of through payroll, the same 2026 limits apply and you claim the deduction on Form 8889. You still need HDHP coverage. The HSA is the only account in the tax code with a triple benefit: deductible going in, tax-free growth, and tax-free withdrawals for qualified medical expenses.3Internal Revenue Service. 2026 Inflation Adjusted Items for Health Savings Accounts
Student Loan Interest
Up to $2,500 of student loan interest is deductible each year. For 2025, the deduction phases out between $85,000 and $100,000 of MAGI for single filers and between $170,000 and $200,000 for joint filers, with slight inflation adjustments each year. Your lender reports the interest on Form 1098-E if you paid $600 or more.5Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education – Section: Student Loan Interest Deduction
Educator Expenses
K-12 teachers, instructors, counselors, principals, and aides who work at least 900 hours in a school year can deduct up to $300 of unreimbursed classroom supplies, books, and computer equipment. Two eligible educators filing jointly can claim up to $600, capped at $300 each.6Internal Revenue Service. Topic No. 458, Educator Expense Deduction The school has to be an elementary or secondary school as defined under state law.7Internal Revenue Service. The Educator Expense Deduction Can Help Offset Out-of-Pocket Classroom Costs
Adjustments Tied to Side Self-Employment
If you have a W-2 job and a side business, that self-employment income opens up additional above-the-line deductions. You can deduct half of the self-employment tax you owe on the side income.8Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) – Section: Self-Employment Tax Deduction If you aren’t eligible for health coverage through your W-2 employer, you may also be able to deduct health insurance premiums against your self-employment income.
Standard Deduction or Itemize
After above-the-line adjustments, every filer chooses between the standard deduction and itemizing on Schedule A. For 2026, the standard deduction is:9Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments from the One, Big, Beautiful Bill
- Single or Married Filing Separately: $16,100
- Married Filing Jointly or Surviving Spouse: $32,200
- Head of Household: $24,150
If you’re 65 or older or legally blind, you get an additional standard deduction on top. For 2025, that extra amount was $2,000 for unmarried filers and $1,600 per qualifying condition for married filers, with the 2026 figures indexed slightly higher. Each condition counts separately, so a single filer who is both 65 and blind gets the extra amount twice.10Internal Revenue Service. Topic No. 551, Standard Deduction
Itemizing only makes sense when your Schedule A total beats your standard deduction. With numbers this high, roughly 90% of filers take the standard deduction. Itemizing tends to pay off for homeowners with large mortgages, filers in high-tax states, and people with unusually large medical bills or charitable giving in a single year.
Itemized Deductions Still Available
State and Local Taxes (SALT)
The SALT deduction covers state and local income taxes (or sales taxes, if you choose that instead) plus property taxes. The TCJA capped this at $10,000. For 2026, the OBBBA raised the cap to $40,000 for filers with MAGI under $500,000 ($250,000 for married filing separately).9Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments from the One, Big, Beautiful Bill
Above $500,000 of MAGI, the cap phases down by 30 cents for every dollar of income above the threshold until it bottoms out at $10,000. In practice, filers with MAGI above roughly $600,000 are back to the old cap. The cap and threshold are scheduled to rise 1% each year going forward.
You pick income tax or sales tax, not both. In states with no income tax, the sales tax option usually wins. Property tax gets added to whichever you chose, subject to your overall cap.
Home Mortgage Interest
Interest on debt used to buy, build, or substantially improve your primary or second home is deductible. For mortgages taken out after December 15, 2017, the deduction covers the first $750,000 of debt ($375,000 for married filing separately). Older mortgages keep the $1 million limit. The OBBBA made these limits permanent.11Internal Revenue Service. Publication 936 (2025), Home Mortgage Interest Deduction
HELOC or home equity loan interest is only deductible if the borrowed funds went into the home securing the loan. Paying off credit cards with a HELOC doesn’t qualify. Points paid at closing on a principal residence are generally deductible in full in the year of purchase; in most other situations they’re spread over the life of the loan. Your lender reports the interest on Form 1098.
Medical and Dental Expenses
Unreimbursed medical and dental expenses are deductible only to the extent they exceed 7.5% of your AGI.12Internal Revenue Service. Publication 502 (2025), Medical and Dental Expenses – Section: How Much of the Expenses Can You Deduct? On an $80,000 AGI, that means the first $6,000 of costs doesn’t count. This deduction usually only helps in a year with major surgery, ongoing treatment, or high premiums paid with after-tax dollars.
Qualifying costs include doctor and hospital bills, prescription drugs, dental and vision care, and after-tax health insurance premiums. Over-the-counter medications generally don’t count unless prescribed.
Charitable Contributions
Donations to qualified charities are deductible within AGI-based limits. Cash gifts to public charities are capped at 60% of AGI. Appreciated property held longer than a year (stock, real estate) is capped at 30% of AGI. Contributions above the limits carry forward up to five years.13Internal Revenue Service. Publication 526 (2025), Charitable Contributions – Section: Limits on Deductions
Documentation matters. Any single donation of $250 or more requires a written acknowledgment from the charity, and non-cash contributions totaling over $500 for the year require Form 8283 attached to your return.14Internal Revenue Service. Publication 526 (2025), Charitable Contributions – Section: Contributions of $250 or More Get the acknowledgment at the time of the gift. Retrieving one during an audit is harder than it sounds.
Check Your State Return
Even though unreimbursed employee expenses are gone federally, some states decoupled from that change and still allow the deduction on state returns. Pennsylvania, for example, lets employees deduct 100% of allowable unreimbursed business expenses with no AGI floor.15Department of Revenue. Unreimbursed Business Expenses Other states that allow some form of the deduction apply a 2% AGI floor similar to the old federal rule. If you have significant unreimbursed costs (professional licenses, required tools, travel your employer won’t cover), your state instructions are worth a look.
Records That Hold Up
A deduction is only as good as the paperwork behind it. The IRS generally has three years from your filing date to audit, extending to six years if you underreport gross income by more than 25%. There’s no time limit for fraud or unfiled returns.16Internal Revenue Service. Topic No. 305, Recordkeeping
Keep receipts, bank statements, Forms 1098 and 1098-E, acknowledgment letters from charities, and copies of contribution confirmations for at least three years after filing, six if your income swings. If you maintain complete records and cooperate with an examination, the burden of proof can shift to the IRS in court.17Office of the Law Revision Counsel. 26 U.S. Code 7491 – Burden of Proof Without records, you have no leverage.