Thinking Ahead on Taxes? 2025 Deductions and ‘One Big Beautiful Bill’ Updates Explained

Part of being an American is looking toward Tax Day with either dread or anticipation — no matter how far out it is. Will you have to cut a check to Uncle Sam, or will you get a plump refund? Tax deductions can tip the scales — a lot — meaning you’ll end up sending less money to the IRS.

Major changes are taking effect under the “One Big Beautiful Bill,” which we will shorten to just “the bill” in this story. So, it’s more important than ever to understand what’s still deductible (and what’s not) before you file. Read on to understand which common tax deductions you could claim when you file your tax return for 2025.

Note that we use 2025 because that’s the tax year for which you will be filing for by the April 15 deadline in 2026.

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What Is a Tax Deduction?

Tax deductions, also known as tax write-offs, lower your taxable income so you’ll pay less overall. You can either go with the standard deduction, which is a predetermined amount that is subtracted from your income, or itemized deductions, which take into account your particular expenses such as charitable donations and some health care costs. 

Your itemized deductions must exceed your standard deduction, or it’s not smart to itemize. Because the federal government changed the tax rules in 2017 to increase the standard deduction (a change which is now permanent thanks to the bill), only about 10% of mostly wealthy Americans itemize deductions, according to the Urban-Brookings Tax Policy Center.

The standard deduction amounts for 2025 tax year, including changes from the bill, are :

• Single or married filing separately: $15,750
• Married filing jointly and surviving spouses: $31,500
• Head of household: $23,625

Tax deductions are different from tax credits. A tax deduction decreases your taxable income, whereas a tax credit lowers the amount of taxes you owe the IRS.

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Calculating Your Adjusted Gross Income

Deductions are typically calculated from something called your adjusted gross income, or AGI.

Do you know how much you make each year? What about the amount you contribute to retirement? The IRS uses this information and more to calculate your adjusted gross income (AGI), which is the starting point for figuring out your tax bill.

Your AGI includes your wages, alimony income from divorces finalized before 2019, dividend income, retirement distributions and business income. Student loan interest payments, health savings account contributions and many contributions to a traditional IRA can be deducted above the line, meaning you can deduct them even if you’re taking the standard deduction. What’s left over is your AGI.

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Changes From 2017 Tax Reform

In late 2017, Congress passed the Tax Cuts and Jobs Act (TCJA), a sweeping overhaul of the federal tax code. Originally set to expire in 2025, these changes are now permanent thanks to the bill, which locked in key provisions of the 2017 tax reform. The main change affecting everyday Americans was to the standard deduction. In 2017, it was $6,350 for single filers and $12,700 for married couples filing jointly. Under the TCJA, it nearly doubled.

While the 2017 changes were good news for some people, they came at the expense of several popular deductions that were eliminated. These include:

• Job-related moving expenses for people who aren’t in the military.
• Home equity loan interest deduction, unless the loan is used to buy, build or substantially improve the home.
• Alimony for the person paying spousal support.
• Job search expenses.
• Unreimbursed work expenses.

The higher standard deduction made itemizing less worthwhile for many taxpayers. Itemizing was often the default choice for homeowners with a mortgage in the past because of the mortgage interest deduction. But now choosing the standard deduction often yields the bigger tax savings.

Standard vs. Itemized Deductions

Still, a number of itemized deductions remain in play.

If your potential deductions equal more than the standard deduction, itemizing will lower your taxable income and save you money.

Here’s another way to think about it: If you’re a young, single person with a full-time job, you’re healthy and you rent rather than own a home, you will almost certainly take the standard deduction because your deductible expenses probably won’t total more than $15,750 in 2025.

But if your financial profile is more complex — think mortgage, property taxes, large medical expenses — then you might benefit from itemizing.

Popular Tax Deductions for Itemizers

If you think you should itemize, you need to know what is and isn’t tax deductible. Here are some common deductions.

1. Charitable Contributions

If you gave money or goods to a charity during the year, you could be eligible for a tax deduction. The IRS must designate the organization as a nonprofit. Usually these are religious, educational or charitable groups.

There are some limitations on what you can include in this deduction. For example, if you donated to your local PBS station and they sent you a “thank you” T-shirt, you can’t deduct the value of the shirt. So if your contribution was $100 and the T-shirt was worth $10, you can only deduct $90 on your tax return.

Note: Under the new rules established by the bill, taxpayers who don’t itemize can now claim a charitable deduction of up to $1,000 (or $2,000 for married couples) starting in 2026. For those who do itemize, only donations that exceed 0.5% of adjusted gross income (AGI) will count, and a new 35% overall cap limits the total value of itemized deductions for high earners. The traditional limits based on the kind of organization still apply: donations to churches, hospitals and colleges qualify for deductions up to 60% of AGI (most people can’t afford to donate over half their income to charity anyway), while gifts to veteran groups and fraternal societies remain capped at 30%.

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2. Mortgage Interest

The interest you pay on your home mortgage can total many thousands of dollars, particularly at the beginning of the loan. Luckily, you can deduct that interest from your taxable income. This is applicable for debt up to $750,000 or $375,000 if you’re married filing separately. Under the One Big Beautiful Bill Act, these amounts have been made permanent and are no longer set to revert to the pre‑2017 limit of $1 million (or $500,000) after 2025. If you bought your home on or before Dec. 15, 2017, the pre-2017 limits apply and you can still deduct mortgage interest on debt up to $1 million or $500,000 if you’re married filing separately.

3. Property Taxes

The 2017 tax reform capped state and local tax (SALT) deductions—including property, income and sales taxes, at $10,000 ($5,000 if married and filing separately) through 2025. Under the bill, that cap is temporarily raised to $40,000 (for joint filers) in 2025, and will be increased annually by 1 % through 2029, and then revert to $10,000 starting in 2030. The higher limit starts to shrink if your income is over $500,000 (or $250,000 if you’re married filing separately), and it disappears entirely for the highest earners. 

For example, let’s say you paid $8,000 of state income tax, $7,000 of property tax, and $6,000 of sales tax. Your combined deduction of $21,000 would still be limited to $10,000 under pre‑2025 rules— but under the new law, you’d be able to deduct the full $21,000 in 2025. However, if your income exceeds $500,000, your deduction would gradually phase back toward the $10,000 cap.

4. Medical Expenses

If you had significant medical expenses last tax year that weren’t reimbursed by insurance, you could get a deduction. These rules haven’t changed with the new bill. Your medical expenses must equal 7.5% or higher of your AGI to qualify for the deduction in 2025. Even then, you can only deduct the amount above 7.5% of AGI. For someone with an AGI of $50,000, that means you can’t deduct medical expenses until they exceed $3,750, or 7.5%.

Qualified medical expenses include:

• Bills paid to doctors, dentists, chiropractors and more
• Hospital visits or stays
• Nursing home care
• Some weight loss programs
• Addiction programs
• Prescription medications
• Transportation to and from medical appointments
• Acupuncture
• Dentures, crutches, hearing aids, wheelchairs and service animals
• Reading or prescription glasses or contact lenses

Deductions You Can Claim With the Standard Deduction

Even if you don’t itemize, there are some valuable deductions you can still claim. They’re known as “above-the-line” deductions.

1. Educator Expenses

In an ideal world, teachers wouldn’t have to pay out of pocket for school supplies. In reality, most teachers routinely dip into their own funds to buy pencils, paper, glue and other items for their classrooms. The IRS allows K-12 teachers to deduct up to $300 ($600 for married filing jointly) for educator expenses such as classroom materials.

Note: Starting in 2026, the new bill will allow educators to deduct unreimbursed classroom expenses with no dollar limit as an itemized deduction.

2. Student Loan Interest

If you paid interest on your student loans, you can deduct up to $2,500 in interest payments if you earned less than $85,000 for single filers or $170,000 if you’re married filing jointly. Above that, the deduction phases out, but those earning up to $100,000 as single filers or $200,000 for those who are married filing jointly can get a reduced deduction.

This only applies for people filing their own tax returns. If you’re still listed as a dependent on your parents’ tax return, you can’t claim the student loan interest deduction. You also can’t claim this deduction if your loan isn’t in your name. So, if your parents took out the loan on your behalf, they may be able to claim the deduction instead, as long as they meet the income and filing status requirements.

3. Moving Expenses for Military

Members of the military are eligible to deduct moving expenses from their taxable income. In previous years, civilians could also deduct moving expenses, but the deduction is now limited to military personnel.

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4. Health Savings Account Contributions

Health savings accounts, or HSAs, are accounts you can use to save for medical expenses if you have a high-deductible health insurance plan. A high-deductible plan is defined as one that has a minimum deductible of $1,650 for a single person or $3,300 for a family in 2025. The annual HSA contribution limits are $4,300 for individuals and $8,550 for families, with an extra $1,000 catch-up for those 55 and older.

5. Self-Employment Expenses

If you’re self-employed, you can deduct quite a few expenses. These include:

• Home office: You can deduct the space devoted to your home office if you’re self-employed. However, you must use this space exclusively for business. You can’t take this deduction if you’re traditionally employed, even if you’re working remotely.
• Education: As a self-employed individual, you can deduct things like tuition, books and lab fees for education that “maintains or improves skills needed in your present work,” according to the IRS.
• Car: If you use your car for business, such as driving to meetings with clients or vendors, you can deduct 67 cents per mile as of 2025.

6. Health Insurance Premiums

If you are self-employed, you can deduct your health premiums. You can also take the deduction, minus any subsidies you received, if you get your health insurance through a state or federal marketplace.

7. IRA Contributions

You could get a tax deduction if you contribute to a traditional IRA as part of your retirement savings portfolio. The maximum contribution for 2025 remains at  $7,000, and $8,000 for those over age 50. You may be able to deduct your contribution depending on how much money you make and whether you or your spouse has an employer-sponsored retirement plan. Consult the IRS guidelines for those income limits.

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Ohio-based Catherine Hiles is a British writer and editor living and working in the U.S. She has a degree in communications from the University of Chester in the U.K. and writes about finance, cars, pet ownership and parenting. 

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