W-2 employees can write off contributions to HSAs, traditional IRAs, and 401(k)s; student loan interest; mortgage interest; state and local taxes; large medical bills; and charitable donations. What you cannot write off, in most cases, is the cost of doing your job: unreimbursed mileage, tools, uniforms, home office expenses, and professional dues stopped being deductible in 2018, and that suspension is now permanent.1Office of the Law Revision Counsel. 26 U.S. Code 67 – 2-Percent Floor on Miscellaneous Itemized Deductions A few narrow professions kept their carve-outs, and there is one workaround worth knowing about: an employer accountable plan.
Why Job Expenses Are Off the Table
The Tax Cuts and Jobs Act of 2017 suspended the miscellaneous itemized deduction that used to cover unreimbursed employee expenses. The One Big Beautiful Bill Act, signed in July 2025, made the suspension permanent. If you pay out of pocket for something your job requires, the federal return offers no line to deduct it. Your options are to get reimbursed by your employer or absorb the cost.
For 2026, the standard deduction is $16,100 for single filers, $32,200 for married filing jointly, and $24,150 for heads of household.2Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill Because employee costs no longer count toward itemizing, the deductions that actually help most W-2 workers fall into two categories: above-the-line adjustments that reduce your adjusted gross income directly, and itemized deductions on Schedule A that only pay off if their total beats your standard deduction.
Above-the-Line Deductions
These are the most broadly useful because they work whether or not you itemize. You claim them on Schedule 1 of Form 1040, and they lower your AGI before you choose between the standard deduction and Schedule A. A lower AGI can also unlock other tax breaks that phase out at higher incomes.
Health Savings Account Contributions
If you’re enrolled in a qualifying high-deductible health plan, HSA contributions are fully deductible above the line. For 2026, the limit is $4,400 for self-only coverage and $8,750 for family coverage.3Internal Revenue Service. Expanded Availability of Health Savings Accounts Under the One, Big, Beautiful Bill Act If you’re 55 or older, add another $1,000.4Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans
To qualify, your plan must have a minimum deductible of $1,700 (self-only) or $3,400 (family), with out-of-pocket maximums no higher than $8,500 or $17,000.5Internal Revenue Service. Revenue Procedure 2025-19 The HSA is the only account where contributions are deductible, growth is tax-free, and qualified withdrawals are tax-free too.
Traditional IRA Contributions
Traditional IRA contributions can be fully or partially deductible depending on your income and whether you’re covered by a retirement plan at work. For 2026, the contribution limit is $7,500, or $8,600 if you’re 50 or older.6Internal Revenue Service. Retirement Topics – IRA Contribution Limits
If you or your spouse is covered by a workplace plan like a 401(k), the deduction phases out as your modified AGI rises; the phase-out ranges vary by filing status and change each year, so check Publication 590-A for the current thresholds. If neither of you is covered by a workplace plan, the full deduction is available regardless of income.
Student Loan Interest
You can deduct up to $2,500 per year in interest paid on qualified student loans, claimed on Schedule 1.7Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education – Section: Student Loan Interest Deduction Your servicer sends Form 1098-E showing the interest you paid.8Internal Revenue Service. About Form 1098-E, Student Loan Interest Statement For 2026, the deduction phases out between $85,000 and $100,000 of modified AGI for single filers, and between $175,000 and $205,000 for married joint filers. Above the top of the range, the deduction disappears.
Self-Employed Health Insurance for Side Income
If you also earn self-employment income from a side business, you may deduct health insurance premiums for yourself, your spouse, and dependents against the net profit from that business. You cannot claim it for any month you or your spouse were eligible for an employer-sponsored plan. It’s reported on Schedule 1.
Pre-Tax Payroll Benefits
Some of the biggest tax savings for W-2 employees never appear as deductions on your return. Traditional 401(k) contributions come out of your paycheck before federal income tax is calculated and never show up in the taxable wages on your W-2. The effect is the same as a deduction, but the mechanics live in payroll rather than on your 1040.
For 2026, the 401(k) elective deferral limit is $24,500. Workers 50 and older can add $8,000 in catch-up contributions, and workers aged 60 through 63 get a higher catch-up of $11,250.9Internal Revenue Service. Retirement Topics – 401(k) and Profit-Sharing Plan Contribution Limits Healthcare and dependent care FSAs work the same way, with pre-tax dollars excluded from your wages. For most W-2 workers, these payroll benefits deliver more tax savings than anything on the return itself.
Itemized Deductions Still Available
These only help if your Schedule A total exceeds your standard deduction. For homeowners in high-tax states or anyone with a rough medical year, that can happen.
State and Local Taxes
The SALT deduction covers state and local income tax (or sales tax, at your choice) plus property taxes. The cap sat at $10,000 from 2018 through 2024. Under the One Big Beautiful Bill Act, the 2026 cap is $40,400.2Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill The higher cap phases down once modified AGI passes $505,000 ($250,000 if married filing separately) and reverts to $10,000 at a MAGI of roughly $606,000. For married couples filing separately, the cap is $20,200 before phase-down. This is the change most likely to move a W-2 homeowner off the standard deduction and back onto Schedule A.
Home Mortgage Interest
You can deduct interest on mortgage debt used to buy or substantially improve your primary or secondary home, up to $750,000 in total mortgage debt ($375,000 if married filing separately). The One Big Beautiful Bill Act made that limit permanent.10Internal Revenue Service. Publication 936 (2025), Home Mortgage Interest Deduction Home equity loan interest is deductible only when the borrowed funds went to buy, build, or substantially improve the home securing the loan. Interest on a HELOC used to pay off credit cards or fund a vacation doesn’t qualify. Your lender reports qualifying interest on Form 1098.11Internal Revenue Service. About Form 1098, Mortgage Interest Statement
Medical and Dental Expenses
Out-of-pocket medical and dental costs are deductible, but only the portion exceeding 7.5% of your AGI.12Internal Revenue Service. Publication 502 (2025), Medical and Dental Expenses At a $75,000 AGI, only expenses above $5,625 count. That threshold is hard to clear in a normal year, but a surgery, hospital stay, or major dental work can push you over. Premiums paid with after-tax dollars count; premiums taken pre-tax through your employer plan don’t.
Charitable Contributions
Cash donations to qualified charities are deductible up to 60% of AGI, and long-term appreciated capital gain property is capped at 30%.13Internal Revenue Service. Publication 526 (2025), Charitable Contributions – Section: Limits Non-cash donations valued above $500 require Form 8283.14Internal Revenue Service. Instructions for Form 8283 (Rev. December 2025)
New for 2026: the One Big Beautiful Bill Act restored a cash charitable deduction for filers who take the standard deduction. You can deduct up to $1,000 in cash contributions, or $2,000 on a joint return, without itemizing. Payment method has to be traceable — check, card, electronic transfer, or payroll deduction.
Educator Expenses
K-12 teachers, counselors, principals, and aides who work at least 900 hours during the school year can deduct unreimbursed classroom supplies and professional development.15Internal Revenue Service. Topic No. 458, Educator Expense Deduction The rules shifted for 2026 under the One Big Beautiful Bill Act: the old $300 per-educator cap is gone, so eligible educators can deduct the full amount they spend. The catch is that the deduction moved from above-the-line to an itemized deduction on Schedule A. Higher ceiling, narrower reach.
For 2025 returns, the prior rules still apply: up to $300 above the line per educator, or $600 on a joint return where both spouses qualify, no itemizing required.
Narrow Professional Carve-Outs
A few W-2 categories kept the ability to deduct work-related costs.
Armed Forces Reservists
Reserve members of the Army, Navy, Air Force, Marine Corps, or Coast Guard, along with National Guard members and Ready Reserve Corps of the Public Health Service, can deduct unreimbursed travel expenses when reserve duties take them more than 100 miles from home. The deduction is capped at the federal per diem rate for the destination and goes above the line on Schedule 1.16Internal Revenue Service. Publication 3 (2025), Armed Forces Tax Guide – Section: Travel Expenses of Armed Forces Reservists
Qualified Performing Artists
Performing artists can deduct work-related business expenses above the line, but three tight conditions all have to hold: AGI before these deductions of $16,000 or less, work for at least two performing-arts employers during the year with at least $200 earned from each, and performing-arts expenses greater than 10% of gross income from those services.17Internal Revenue Service. Publication 463 (2025), Travel, Gift, and Car Expenses The $16,000 threshold hasn’t been adjusted for inflation in decades.
Fee-Basis Government Officials
State and local government officials compensated wholly or partly on a fee basis can deduct expenses incurred performing their official duties, claimed above the line on Schedule 1.
Impairment-Related Work Expenses
An employee with a physical or mental disability can deduct expenses that are necessary to perform the job and directly attributable to the impairment. This one was never subject to the old 2% AGI floor and remains available as an itemized deduction on Schedule A.
The Accountable Plan Workaround
Since ordinary work expenses aren’t deductible, the tax-efficient path for covering them is employer reimbursement through an accountable plan. Under federal regulations, the plan must meet three requirements: expenses must have a business connection, you must substantiate each one to your employer within a reasonable time, and you must return any excess reimbursement.18eCFR. 26 CFR 1.62-2 – Reimbursements and Other Expense Allowance Arrangements
Reimbursements that meet those rules are excluded from your wages entirely. They don’t show up on your W-2, and you owe no tax on them. This covers work travel, required equipment, professional development, and similar costs. If your employer doesn’t have an accountable plan, it’s worth raising. The employer still deducts the reimbursements as a business expense, and you receive them tax-free.
Reimbursements that don’t meet accountable-plan rules, like a flat monthly stipend with no documentation requirement, are treated as taxable wages. They land on your W-2, and there’s no offsetting deduction on your return.
Check Your State Return
The federal suspension of unreimbursed employee expenses does not automatically extend to state returns. States decide independently whether to follow the federal code. Some decouple and still allow deductions for mileage, professional dues, home office costs, and similar work expenses on the state return, usually with their own limits and AGI floors. If your state is one of them, keep records of unreimbursed work expenses through the year even when they do nothing on your federal return — your state itemized deductions may be calculated separately from the federal ones.