Individual Taxation: Adjustments & Deductions

Adjustments (reduce adjusted gross income (AGI))

Traditional individual retirement account (IRA) · self-employed plans · health savings account (HSA) · ½ self-employment tax · self-employed health insurance · student loan interest ($2,500) · educator ($300) · pre-2019 alimony.

2026 standard deduction

$16,100 single · $32,200 joint · $24,150 head of household (+ extra if 65+ or blind).

One Big Beautiful Bill Act (OBBBA) deductions, 2025–2028 (below the line)

• Tips: $25,000; phase-out over $150,000 / $300,000.
• Overtime premium: $12,500 / $25,000 joint.
• Seniors 65+: $6,000 each; phase-out over $75,000 / $150,000.
• New US-assembled car loan interest: $10,000; phase-out over $100,000 / $200,000.

Itemized

• Medical: above 7.5% of AGI.
• State and local taxes (SALT): $40,400 cap (2026); phase-down above $505,000; floor $10,000.
• Mortgage interest: $750,000 acquisition debt (permanent).
• Investment interest: up to net investment income.
• Charity: cash 60% of AGI; 2026+ floor of 0.5% of AGI; 5-year carryforward. Non-itemizers: $1,000 / $2,000.
• Casualty: declared disasters only; $100 + 10% of AGI.
• 2% miscellaneous deductions: gone permanently.

Qualified business income (QBI) deduction

20%, permanent; wage and property limits and specified service business exclusion above the threshold (phase-in $75,000 / $150,000); $400 minimum from 2026.

Exam traps

• Only unreimbursed medical expenses count — insurance reimbursements reduce them.
• Appreciated long-term capital gain property given to a public charity: deduct fair market value, limited to 30% of AGI.
• Home equity interest is deductible only if the loan was used to buy, build or substantially improve the home.
• The OBBBA deductions for tips, overtime and seniors don't reduce AGI, but can be claimed alongside the standard deduction.