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6 Deductions You May Be Able to Take Even If You Don’t Itemize

The Tax Cuts and Jobs Act nearly doubled the standard deduction. As a result, 28.5 million fewer Americans are expected to itemize for 2018.1

That said, even taxpayers who don’t itemize for 2018 may be eligible for one or more above-the-line deductions—that is, expenses that can be subtracted from your gross income before you calculate your taxable income.

For savers:

  • Traditional Individual Retirement Account (IRA) contributions: Depending on your situation, you may be able to deduct some or all of your contributions to a traditional IRA (see chart, below)—up to the annual maximum of $5,500 ($6,000 in 2019), or $6,500 for those ages 50 and older ($7,000 in 2019).

 

 

Full deduction allowed if:

Partial deduction allowed if:

Single

  • You earned less than $63,000 ($64,000 in 2019) or
  • You were not covered by an employer-sponsored retirement plan
  • You were covered by an employer-sponsored retirement plan and you earned between $63,000 and $73,000 (between $64,000 and $74,000 in 2019)

Married filing jointly*

  • You earned less than $101,000 ($103,000 in 2019) or
  • Neither you nor your spouse was covered by an employer-sponsored retirement plan
  • Both you and your spouse were covered by an employer-sponsored retirement plan and you earned between $101,000 and $121,000 (between $103,000 and $123,000 in 2019) or
  • Only your spouse was covered by an employer-sponsored retirement plan and you earned between $189,000 and $199,000 (between $193,000 and $203,000 in 2019)

*Income limits are for combined earnings.

 

  • Health Savings Account (HSA) contributions: Regardless of income, HSA contributions are fully deductible up to $3,450 for individuals ($3,500 in 2019) and $6,900 for families ($7,000 in 2019), plus an extra $1,000 for those ages 55 and older.

For the self-employed:

  • Health insurance premiums: Individuals can deduct 100% of their health insurance premiums, up to the total annual profit from the business. However, those who have multiple businesses must choose only one business when determining deductibility.
  • Retirement plan contributions: Annual contributions to SEP IRAs, SIMPLE IRAs and solo 401(k) plans are generally 100% deductible up to the contribution limit. Plan limits vary, however, so be sure to consult a tax advisor for help determining deductibility.
  • Self-employment tax: Those who are self-employed must pay the employee and employer portions of their Social Security and Medicare taxes (12.4% and 2.9%, respectively). However, the IRS allows you to deduct 50% of the total from your personal tax return.

For students:

  • Student loan interest: Individuals can deduct up to $2,500 in student loan interest, provided their modified adjusted gross income is less than $65,000 for single filers or $135,000 for married couples, at which points the deduction begins to phase out.

You may be entitled to other above-the-line deductions not listed here, so be sure to check with a tax professional before filing your return.

1Tables Related to the Federal Tax System as in Effect 2017 Through 2026, United States Congress Joint Committee on Taxation, 04/23/2018.

What You Can Do Next

  • Read more tax tips from Schwab’s experts.
  • Ready to get a jump-start on your taxes? Schwab clients can log in to download 2018 tax forms.
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Important Disclosures:

This information does not constitute and is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends consultation with a qualified tax advisor, CPA, financial planner, or investment manager.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.

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