What is the difference between a tax deduction and a tax credit?

A tax deduction reduces your taxable income, meaning you pay tax on a smaller amount. A tax credit, on the other hand, directly reduces the amount of tax you owe, dollar-for-dollar. Tax credits are generally more valuable than deductions because they provide a direct reduction in your tax bill, regardless of your tax bracket.

Can I claim both the standard deduction and itemized deductions?

No, you must choose one or the other. You cannot claim both the standard deduction and itemized deductions. You should calculate both to see which option results in a lower taxable income and thus a lower tax bill.

What records do I need to keep for tax deductions?

You should keep meticulous records for at least three years from the date you filed your original return or two years from the date you paid the tax, whichever is later. This includes receipts, invoices, canceled checks, bank statements, credit card statements, mileage logs, and any written acknowledgments for charitable contributions. Digital copies are generally acceptable.

What are the most common tax deductions for individuals?

The most common tax deductions for individuals include contributions to traditional IRAs and HSAs (above-the-line), and if itemizing, home mortgage interest, state and local taxes (up to the $10,000 cap), and charitable contributions. The standard deduction is the most commonly claimed deduction overall.

How much can I deduct for student loan interest in 2026?

For the 2026 tax year, you can deduct up to $2,500 in student loan interest paid. This deduction is an "above-the-line" deduction, meaning it reduces your adjusted gross income (AGI) and can be claimed even if you take the standard deduction. However, it phases out at higher income levels.

Can I deduct my home office expenses if I work from home for an employer?

No, as of the Tax Cuts and Jobs Act of 2017, employees can no longer deduct unreimbursed employee business expenses, including home office expenses. This deduction is only available for self-employed individuals who use a portion of their home exclusively and regularly for business.

When should I consult a tax professional?

You should consider consulting a tax professional if your tax situation is complex, such as owning a business, having significant investments, experiencing major life changes (marriage, divorce, new child, home purchase), or if you simply feel overwhelmed by tax preparation. A professional can help ensure accuracy, identify all eligible deductions, and provide strategic tax planning advice.

Tax Deduction Guide: Save on Taxes | One Percent Finance