Tax Deductions for Individuals: A Summary
Sean Lowry
Analyst in Public Finance
January 8, 2014
Congressional Research Service
7-5700
www.crs.gov
R42872
CRS Report for Congress
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epared for Members and Committees of Congress

Tax Deductions for Individuals: A Summary

Summary
Every tax filer has the option to claim deductions when filing their income tax return. Deductions
serve four main purposes in the tax code: (1) to account for large, unusual, and necessary personal
expenditures, such as extraordinary medical expenses; (2) to encourage certain types of activities,
such as homeownership and charitable contributions; (3) to ease the burden of taxes paid to state
and local governments; and (4) to adjust for the expenses of earning income, such as
unreimbursed employee expenses.
Some tax deductions can be taken by individuals even if they do not itemize. These deductions
are commonly referred to as above-the-line deductions, because they reduce a tax filer’s adjusted
gross income (AGI, or the line). In contrast, itemized and standard deductions are referred to as
below-the-line deductions, because they are applied after AGI is calculated to arrive at taxable
income.
Tax filers have the option to claim either a standard deduction or to itemize certain deductions.
The standard deduction, which is based on filing status, is, among other things, intended to reduce
the complexity of paying taxes, as it requires no additional documentation. Alternatively, tax
filers claiming itemized deductions must list each item separately on their tax return and be able
to provide documentation that the expenditures being deducted have been made. Only tax filers
with deductions that can be itemized in excess of the standard deduction find it worthwhile to
itemize. Whichever deduction the tax filer claims—standard or itemized—the amount is
subtracted from AGI.
Deductions differ from other tax provisions that can reduce a tax filer’s final tax liability.
Deductions reduce final tax liability by a percentage of the amount deducted, because deductions
are calculated before applicable marginal income tax rates. In contrast, tax credits generally
reduce an individual’s tax liability directly, on a dollar-for-dollar basis, because they are
incorporated into tax calculations after marginal tax rates are applied.
Some deductions can only be claimed if they meet or exceed minimum threshold amounts
(usually a certain percentage of AGI) in order to simplify tax administration and compliance. In
addition, some deductions are subject to a cap (also known as a ceiling) in benefits or eligibility.
Caps are meant to reduce the extent that tax provisions can distort economic behavior, limit
revenue losses, or reduce the availability of the deduction to higher-income tax filers.
Because some tax filers and policymakers may not have detailed knowledge of tax deductions,
this report first describes what they are, how they vary in their effects on reducing taxable
income, and how they differ from other provisions (e.g., exclusions or credits). Next, a discussion
concerning the rationale for deductions as part of the tax code is provided. Because some
deductions are classified as tax expenditures, or losses in federal revenue, they might be of
interest to Congress from a budgetary perspective. The final section of this report includes tables
that summarize each individual tax deduction, under current law. Many of these deductions are
part of the permanent income tax code. The American Taxpayer and Relief Act of 2012 (P.L. 112-
240) extended several temporary provisions through 2013. The Tax Extender Act of 2013 (S.
1859) would provide a one-year extension for nearly all of the provisions scheduled to expire at
the end of 2013.
This report will be updated, as necessary, to reflect changes in current law.
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Tax Deductions for Individuals: A Summary

Contents
Calculating the Individual Income Tax ............................................................................................ 1
What Are Tax Deductions? .............................................................................................................. 2
Above-vs.-Below-the-Line Deductions ........................................................................................... 3
Itemized Versus Standard Deductions.............................................................................................. 4
Standard Deduction ................................................................................................................... 4
Itemized Deductions .................................................................................................................. 6
Pease Limit on Itemized Deductions for Higher-Income Tax Filers ......................................... 7
Summary of Individual Tax Deductions .......................................................................................... 8

Figures
Figure 1. Computation of Federal Personal Income Tax Liability................................................... 2
Figure 2. Above- Versus Below-the-Line Deductions on the IRS Form 1040 ................................. 3

Tables
Table 1. Summary of Above-the-Line, Tax Deductions for Individuals ........................................ 10
Table 2. Summary of Below-the-Line, Itemized Tax Deductions for Individuals ......................... 17

Contacts
Author Contact Information........................................................................................................... 23

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Tax Deductions for Individuals: A Summary

his report provides an overview of income tax deductions for individuals. A tax deduction
reduces the amount of a tax filer’s income that is subject to taxation, ultimately reducing
Tthe tax filer’s tax liability. Every tax filer has the option to claim deductions when filing
their income tax return. However, some tax filers and policymakers may not have detailed
knowledge of tax deductions, including future changes in the requirements to claim certain
deductions. In addition, tax deductions may be of interest to Congress from a budgetary
perspective, as some deductions are classified as tax expenditures, and result in losses in federal
revenue.
This report first describes what tax deductions are, how they vary in their effects on reducing
taxable income, and how they differ from other provisions (e.g., exclusions or credits). Next, it
discusses the rationale for deductions as part of the tax code. The final section includes tables that
summarize each individual tax deduction, under current law.
This report focuses on the standard treatment of tax deductions for individuals under the
individual income tax code. As such, the following are beyond the scope of this report:
• the different treatment of deductions under the alternative minimum tax for
individuals,1
• tax deductions for businesses under the individual income tax code,2 and
• options for reforming itemized deductions.3
Calculating the Individual Income Tax
To understand what tax deductions are, it is helpful to first understand how a tax filer calculates
individual income tax liability. Figure 1 provides an overview of how a tax filer calculates his or
her federal tax liability.4 To calculate taxes owed (tax liability), tax filers first add up all of their
forms of income (see step 1 in Figure 1) to calculate their gross income. Next, the tax filer
subtracts any above-the-line deductions to calculate their adjusted gross income, or AGI (step 2).
AGI is often referred to as “the line.” Then, the tax filer subtracts personal exemptions, or fixed
dollar amounts per spouse and dependent child (step 3). The tax filer then subtracts the greater of
either the sum of all of their below-the-line, or itemized deductions, or the standard deduction,
which is a fixed amount based on filing status, in order to arrive at taxable income (step 4). The
marginal tax rates are applied to taxable income (step 5) to arrive at a preliminary tax liability.

1 See CRS Report RL30149, The Alternative Minimum Tax for Individuals, by Steven Maguire.
2 Some of the deductions reported on the Internal Revenue Service Form 1040 relate to business expenses, as some
business are organized as pass-through entities. Pass-through entities get their name from the fact that the business’s
income passes-through to the owner, as opposed to being claimed separately by the business. However, the tax
treatment of business income through the individual tax code is beyond the scope of this report. For more information
on pass-through entities, see CRS Report R40748, Business Organizational Choices: Taxation and Responses to
Legislative Changes, by Mark P. Keightley.
3 For example, see CRS Report R42435, The Challenge of Individual Income Tax Reform: An Economic Analysis of
Tax Base Broadening, by Jane G. Gravelle and Thomas L. Hungerford; and CRS Report RL33755, Federal Income
Tax Treatment of the Family, by Jane G. Gravelle.
4 For a more detailed description of each of these tax terms, see CRS Report RL30110, Federal Individual Income Tax
Terms: An Explanation, by Mark P. Keightley. For a general explanation of the federal tax system, see CRS Report
RL32808, Overview of the Federal Tax System, by Molly F. Sherlock and Donald J. Marples.
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Tax Deductions for Individuals: A Summary

Finally, tax credits are subtracted from preliminary tax liability (step 6) to arrive at final tax
liability. The provisions in Figure 1 surrounded by dotted lines are covered in this report.
Figure 1. Computation of Federal Personal Income Tax Liability

Source: Harvey S. Rosen, Public Finance, 7th ed. (New York, NY: McGraw-Hill Irwin, 2005), p. 360.
What Are Tax Deductions?
Simply stated, deductions reduce taxable income. Each deduction reduces tax liability by the
amount of deduction times the tax filer’s marginal tax rate. In contrast, a tax credit reduces tax
liability on a dollar-for-dollar basis because it would be applied after the marginal tax rate
schedule. An individual in a 35% tax bracket would receive a reduction in taxes of $35 for each
$100 deduction while an individual in a 25% tax bracket would receive a reduction in taxes of
$25 for each $100 deduction. Hence, the same deduction can be worth different amounts to
different tax filers depending on their marginal tax bracket. The tax savings from deductions are
generally equal to the tax filer’s marginal tax rate times the amount of the deduction. So higher-
income tax filers typically benefit more than lower-income tax filers from deductions.
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Tax Deductions for Individuals: A Summary

Deductions serve four main purposes in the tax code.5 First, they can account for large, unusual,
and necessary personal expenditures, such as the deduction for extraordinary medical expenses.
Second, they are used to encourage certain types of activities, such as homeownership and
charitable contributions. Third, they account for and ease the burden the burden of paying for
non-federal forms of taxes, such as state and local taxes. Fourth, deductions adjust for the
expenses of earning income, such as deductions for work-related employee expenses.
The following sections define each form of deduction and explain in greater detail how
deductions are used in the calculation of an individual’s tax liability.
Above-vs.-Below-the-Line Deductions
To arrive at final tax liability, all taxpayers may be able to claim above-the-line deductions
whether they claim itemized deductions or the standard deduction. Each of these deductions has a
specific line on the Form 1040 (e.g., line 34 for the deduction of student loan interest). Figure 2
shows how tax deductions appear on the IRS Form 1040.
Figure 2. Above- Versus Below-the-Line Deductions on the IRS Form 1040

Source: Internal Revenue Service, 2012Form 1040, at http://www.irs.gov/file_source/pub/irs-pdf/f1040.pdf.

5 Joseph A. Pechman, Federal Tax Policy, 3rd ed. (Washington, DC: Brookings Institution Press, 1977), pp. 85-88.
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Tax Deductions for Individuals: A Summary

These deductions are commonly referred to as above-the-line deductions, because they reduce a
tax filer’s AGI (the line). Above-the-line deductions are sometimes also called adjustments to
income, because they generally represent costs incurred to earn income. In contrast, itemized and
standard deductions are sometimes referred to below-the-line deductions, because they are
applied after AGI is calculated to arrive at taxable income.
Above-the-line deductions may provide additional benefits to some tax filers seeking to claim
certain tax preferences. A number of tax provisions have a phaseout of benefits as income
increases. The higher the AGI, the less likely the tax filer will be able to claim a larger value of
the tax preference. Tax deductions that lower AGI increase the likelihood that the tax filer will be
able to claim a larger value of the tax preference.
Itemized Versus Standard Deductions
As previously discussed, tax filers have the option to claim either a standard deduction or the sum
of their itemized deductions. Whichever deduction the tax filer claims—standard or itemized—
the deduction amount is subtracted from AGI to arrive at final tax liability.
Standard Deduction
The standard deduction is a fixed amount, based on filing status, available to all taxpayers. In
contrast to those itemizing their deductions, tax filers do not have to provide additional
documentation in order to claim the standard deduction.
The standard deduction was introduced into the federal tax code with the passage of the
Individual Income Tax Act of 1944 (P.L. 78-315) primarily to simplify tax administration and
compliance. At the time of passage, it was noted that taxpayers generally had little idea about
what deductions were allowable and few taxpayers kept accurate records. Thus, the enactment of
the standard deduction reduced excessive unsupportable claims of deductions, although at the
same time it permitted many taxpayers to take a deduction in excess of what they would have
been allowed if they had been required to itemized their deductions.
Today it is also viewed as performing a social welfare purpose. The social welfare purpose of the
standard deduction was introduced with the minimum standard deduction in the Revenue Act of
1964 (P.L. 88-272). Under this minimum standard deduction provision, a taxpayer was assured a
minimum amount of deductions from his or her income. The personal exemptions combined with
the standard deduction amount are designed to remove low-income households from the tax rolls.
The calculation of the standard deduction has changed over time. In 1944, it was equal to 10% of
AGI, up to a maximum of $1,000. In 1964, a minimum standard deduction was introduced as a
fixed value of $200 plus $100 for each exemption with a ceiling of $1,000 if married filing
jointly.6 The value of the standard deduction, including both the percent of AGI and the maximum
value, was increased multiple times from 1969 to 1975. The minimum standard deduction and the
deduction were merged in 1977 into a flat standard deduction of $2,200 (single) and $3,200

6 CRS Report 80-31, Historical Summary of Selected Features of the Individual Income Tax, by George J. Leibowitz
and Jane G. Gravelle. This archived report, last updated by Cheryl Savage Newton in 1980, is available upon request.
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Tax Deductions for Individuals: A Summary

(married filing jointly).7 The Economic Recovery Tax Act of 1981 (P.L. 97-34) indexed standard
deduction amounts for inflation, beginning in 1985.8 The standard deduction has been increased
over time, such as with the Tax Reform Act of 1986 (TRA86; P.L. 99-514).
The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16)
phased out part of the so-called marriage penalty associated with the federal tax code, where the
standard deduction for joint filers was less than twice the single filer amount. EGTRRA increased
the deduction for joint filers to 200% of singles. This provision, most recently extended by Tax
Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (P.L. 111-312),
expired in 2012. Under current law, the standard deduction for married couples filing jointly will
be equal to 167% of upper limit for singles for the 2013 tax year and beyond.9
The standard deduction amount varies depending on the filing status of the tax unit (i.e., single,
married filing jointly, married filing separately, or head of household), whether the tax filer is
over the age of 65, and whether the tax filer is blind.
For the 2013 tax year (2014 filing season), the inflation-adjusted standard deductions are as
follows:
• $12,200 for married filing jointly or surviving spouses,
• $6,100 for single tax filers and married filing separately, and
• $8,950 for tax filers who qualify as the head of a household.10
For the 2014 tax year (2015 filing season), the inflation-adjusted standard deductions are
as follows:
• $12,400 married filing jointly or surviving spouses,
• $6,200 for single tax filers and married filing separately, and
• $9,100 for tax filers who qualify as the head of a household.11
In addition, there is a standard deduction available for an individual who can be claimed as a
dependent on another person’s tax return. For tax year 2013 (2014 filing season), the standard
deduction for a dependent is generally limited to the greater of: (a) $1,000 or (b) the sum of the
individual’s earned income for the year plus $300 (but not more than the regular standard
deduction amount of $6,100 for single tax filers).12
The additional standard deductions for those aged 65 or older and those who are legally blind are
increased by $1,500 if single or head of household and $1,500 if married filing jointly for tax year

7 Ibid.
8 Jon Bakija and Eugene Steuerle, “Individual Income Taxation Since 1948,” National Tax Journal, vol. 44, no. 4
(December 1991), p. 453.
9 See CRS Report R42485, An Overview of Tax Provisions Expiring in 2012, by Margot L. Crandall-Hollick.
10 See U.S. Congress, Joint Committee on Taxation, Overview of the Federal Tax System As in Effect for 2013,
committee print, 113th Cong., 1st sess., January 8, 2013, JCX-2-13R (Washington: GPO, 2013), p. 4.
11 See Internal Revenue Service, Internal Revenue Bulletin No. 2013-47, November 18, 2013, at http://www.irs.gov/
pub/irs-irbs/irb13-47.pdf.
12 For the 2014 tax year (2015 filing season), the standard deduction for a dependent is limited to the greater of $1,000
or the sum of $350 and the individual’s earned income. See ibid.
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Tax Deductions for Individuals: A Summary

2013 (2014 filing season).13 These increases apply per classification and are added above the base
standard deduction amounts listed above. Thus, a 70-year-old blind and single tax filer would be
eligible for a $3,000 increase ($1,500 for being 65 or older, and $1,500 for being blind) in his or
her standard deduction for tax year 2013. These amounts are adjusted annually for inflation.
Itemized Deductions
Alternatively, tax filers claiming itemized deductions must list each item separately on their tax
return and be able to provide documentation (i.e., in the event of an IRS audit) that the
expenditures have been made.
Tax filers have been able to itemize their deductions since the Revenue Act of 1913 (P.L. 63-16),
which created the first permanent federal income tax. Deductions for interest paid or unexpected
casualty losses were early provisions in the federal income tax code because many businesses
were sole proprietorships (i.e., pass-through entities) where the owner was personally liable for
the costs of doing business. Itemized deductions have been reduced or limited in eligibility, most
notably with TRA86. For example, TRA86 eliminated deductions for consumer interest and
enacted more complex rules for deducting investment interest.14
Only individuals with aggregate itemized deductions greater than the standard deduction find it
worthwhile to itemize. Itemized deductions are claimed on the IRS Schedule A form.15 Itemized
deductions are allowed for a variety of purposes. A detailed summary of the requirements and
limits for each of these provisions, and other itemized deductions, is included in Table 2, at the
end of this report.
Some itemized deductions can only be claimed if they meet or exceed minimum threshold
amounts (usually a certain percentage of AGI) in order to simplify tax administration and
compliance. For example, a tax filer must meet a certain threshold (or a floor) to deduct a
casualty, disaster, or theft loss.
Certain itemized deductions are treated as miscellaneous itemized deductions, which are allowed
only to the extent that their total exceeds 2% of the individual tax filer’s AGI. This floor makes it
simpler for a tax filer to choose whether he or she would be better off itemizing the deductions or
choosing to claim the standard deduction, and it helps to ensure that the IRS is only reviewing
documentation of fewer, larger events rather than many, smaller events. Any restriction placed
upon an itemized deduction generally applies prior to the 2% AGI floor.16 An example of an
expense subject to the combined 2% of AGI floor for miscellaneous deductions is the 50%
reduction for unreimbursed meals while traveling away from home on business.

13 For the 2014 tax year (2015 filing season), the additional standard deduction for the aged or the blind is 1,200. The
additional standard deduction amount is increased to $1,550 if the individual is also unmarried and not surviving a
spouse. See ibid.
14 See Sally Wallace, “Itemized Deductions,” in Encyclopedia of Taxation and Tax Policy, ed. Joseph J. Cordes, Robert
D. Ebel, and Jane G. Gravelle (Washington, DC: Urban Institute Press, 2000), p. 215. For an explanation of reforms to
particular itemized tax deductions in the Tax Reform Act of 1986, see U.S. Congress, Joint Committee on Taxation,
General Explanation of the Tax Reform Act of 1986, committee print, 100th Cong., 1st sess., May 4, 1687, JCS-10-87
(Washington: GPO, 1987).
15 Internal Revenue Service, 2012 Schedule A (Form 1040), at http://www.irs.gov/pub/irs-pdf/f1040sa.pdf.
16 Internal Revenue Code (IRC) Section 162(a).
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Tax Deductions for Individuals: A Summary

In addition, some deductions are subject to a cap (also known as a ceiling) in benefits or
eligibility. Caps are meant to reduce the extent that tax provisions can distort economic behavior,
limit revenue losses, or reduce the availability of the deduction to higher-income tax filers. For
example, the home mortgage interest itemized deduction is limited to mortgage debt in the
amount of up to $1 million for married couples filing jointly ($500,000 for individuals or married
filing separate).17 This ceiling is intended to limit incentives for higher-income tax filers to
finance their home purchases with deductible interest.
Pease Limit on Itemized Deductions for Higher-Income Tax Filers
There is a limitation on the value of itemized deductions that certain, higher-income tax filers can
claim. The limitation on itemized deductions was initially included in the Omnibus Budget
Reconciliation Act of 1990 (P.L. 101-508), drafted by Representative Donald Pease of Ohio.
Commonly referred to as “Pease” by tax analysts, it effectively increases taxes on high-income
tax filers without explicitly increasing tax rates.
Pease’s limitations are triggered by an AGI threshold.18 The number or total amount of itemized
deductions claimed by a tax filer does not determine whether he or she is subject to Pease. Pease
affects tax filers above the inflation-adjusted AGI thresholds who itemize deductions. For these
tax filers, the total of certain itemized deductions is reduced by 3% of the amount of AGI
exceeding the threshold.19 The total reduction, however, cannot be greater than 80% of the
deductions (and the tax filer always has the option of taking the standard deduction).
Consequently, the effective marginal tax rate for these tax filers will be 3% higher than their
statutory marginal tax rate.20
Pease was in effect from 1991 to 2009, and was fully repealed from 2010 to 2012.21 The
Economic Growth and Tax Relief Reconciliation Act of 2001 (P.L. 107-16) included the phased-
in repeal of Pease between 2006 and 2009. Pease was scheduled to be reinstituted beginning with
the 2011 tax year, but the reintroduction was postponed until the 2013 tax year by the Tax Relief,
Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312).
The American Taxpayer and Relief Act of 2012 (ATRA; P.L. 112-240) restored Pease for tax
years 2013 and beyond. Prior to the enactment of ATRA, Pease’s income thresholds would have
been triggered at $177,550 for single filers for 2013.22 After the enactment of ATRA, Pease
applies to tax filers for the 2013 tax year (2014 filing season) with an AGI of

17 IRC §163(h).
18 Ibid.
19 The deductions not subject to the Pease limitation are medical and dental expenses, investment interest, qualified
charitable contributions, and casualty and theft losses.
20 The statutory tax rate is the marginal tax rate a tax filer faces based on their AGI. In contrast, the effective marginal
tax rate is the net rate a taxpayer pays on an increment of income that includes all forms of taxes, including the
different rate for itemized deductions under Pease. The average effective tax rate is calculated by dividing total tax
liability by total gross income.
21 For more information on the Pease limitation and sample calculations, see CRS Report R41796, Deficit Reduction:
The Economic and Tax Revenue Effects of the Personal Exemption Phaseout (PEP) and the Limitation on Itemized
Deductions (Pease), by Thomas L. Hungerford.
22 U.S. Congress, Joint Committee on Taxation, Description of Revenue Provisions Contained in the President’s Fiscal
Year 2013 Budget Proposal, committee print, 112th Cong., 2nd sess., June 2012, JCS-2-12 (Washington: GPO, 2012), p.
200.
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Tax Deductions for Individuals: A Summary

• $250,000, if single and not married;
• $275,000, if head of household;
• $300,000, if married filing jointly or a surviving spouse; or
• $150,000, if married, filing separately.23
For the 2014 tax year (2015 filing season) the Pease threshold amounts are adjusted to
• $254,200, if single and not married;
• $279,650, if head of household;
• $305,050, if married filing jointly or a surviving spouse; or
• $152,525, if married, filing separately.24
Summary of Individual Tax Deductions
Table 1 and Table 2 provide a summary of above- and below-
the-line tax deductions, respectively.25 The first column
Abbreviations Used in
provides a reference to where the provision can be found on
Table 1 and Table 2
the Form 1040 (if an above-the-line deduction) or on the
S: Single tax filer
Schedule A form (if a below-the-line, itemized tax deduction).
The provision column contains a reference to where the
MFJ: Married, filing jointly
provision can be found in the Internal Revenue Code (IRC),
MFS: Married, filing separately
which is Title 26 of the U.S. Code. A brief summary of the
HOH: Head of household filer
provision follows in the adjacent column. When applicable,
SS: Surviving spouse filer
annual limits (whether they are floors or ceilings) and income
limits and phaseouts are provided.26 The last column provides
the tax expenditure amount for FY2013 and FY2014.27
Tax expenditures are defined under the Congressional Budget and Impoundment Control Act of
1974 (P.L. 93-344) as “revenue losses attributable to provisions of the Federal tax laws which
allow a special exclusion, exemption, or deduction from gross income or which provide a special
credit, a preferential rate of tax, or a deferral of tax liability.”28 Tax expenditure estimates are
based on current law, which does not assume extensions of temporary provisions that are subject
to expire within the time period observed. Not all tax deductions have JCT tax expenditure
estimates, as some provisions are estimated to result in revenue losses less than $50 million per

23 These Pease income thresholds will be adjusted for inflation for tax years after 2013.
24 See Internal Revenue Service, Internal Revenue Bulletin No. 2013-47, November 18, 2013, at http://www.irs.gov/
pub/irs-irbs/irb13-47.pdf.
25 For more information about each provision, please refer to the latest IRS tax guide or the specific Internal Revenue
Code provision within the U.S. Code. These summary tables are not meant to be a substitute for professional tax
assistance.
26 Some provisions in the tax code are phased out (i.e., their value is reduced as income rises) for higher-income
taxpayers as a way to target tax benefits on middle- and lower-income households and to limit the loss of revenue.
27 Joint Committee on Taxation, Estimates of Federal Tax Expenditures, For Fiscal Years 2012-2017, 113th Congress,
1st session, February 1, 2013, JCS-1-13 (Washington: GPO, 2013).
28 P.L. 93-344, Section 3(3).
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Tax Deductions for Individuals: A Summary

fiscal year (JCT’s de minimus level). In addition, some tax deductions are not considered tax
expenditures for various, other reasons.29 For example, the deduction for uncompensated
employee expenses is considered an appropriate measure to adjust a tax filer’s AGI.

29 For a discussion of the debate over what is and what is not a tax expenditure, see Leonard E. Burman, “Is the Tax
Expenditure Concept Still Relevant?,” National Tax Journal, vol. 56, no. 3 (September 2003), pp. 613-627, and Donald
B. Marron, “Spending in Disguise,” National Affairs, no. 8 (Summer 2011), at http://www.nationalaffairs.com/
publications/detail/spending-in-disguise.
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Table 1. Summary of Above-the-Line, Tax Deductions for Individuals
Tax
1040
Summary of
Annual
Income Limits
Expenditure,
Linea Provision
Deductible Expense
Deduction Limit
and Phaseouts
in Billionsb
23
Educator
An eligible employee of a public (including charter) and
$250 None
FY2013: $0.2
expenses
private elementary or secondary school may deduct
IRC §62
ordinary and necessary expenses paid in connection with
FY2014: $0.1
books, supplies, equipment (including computers and
software), and other materials used in the classroom.
This “tax extender” provision expires after the 2013 tax year
(2014 filing season). The Tax Extender Act of 2013 (S.
1859) would provide a one-year extension this provision,
through tax year 2014 (2015 filing season).
24
Certain
Certain reimbursed business expenses of National
None None FY2013: $0.1
reimbursed
Guard and Reserve members who traveled more than
business
100 miles from home to perform their services;
FY2014: $0.1
expenses of
performing arts-related expenses; and business expenses
reservists,
of fee-basis state or local government officials.
performing
artists, and fee-
basis
government
officials
IRC §162(p),
62(a)(2)(E), and
62(a)(1)
CRS-10

Tax Deductions for Individuals: A Summary
Tax
1040
Summary of
Annual
Income Limits
Expenditure,
Linea Provision
Deductible Expense
Deduction Limit
and Phaseouts
in Billionsb
25
Health savings
Eligible individuals can establish Health Savings Accounts
2013: $3,250 for
None
FY2013: $1.8
account (HSA)
(HSAs) and fund these accounts when they have
individual plans and
contributions
qualifying high deductible health insurance (insurance
$6,450 for family
FY2014: $2.1
IRC §223
with a deductible of at least $1,200 for single coverage
plans; individuals
and $2,400 for family coverage, plus other criteria
aged 55 or older
described below) and no other health care coverage,
can contribute an
with some exceptions.
additional $1,000.
2014: $3,300 for
individual plans and
$6,550 for family
plans; individuals
aged 55 or older
can contribute an
additional $1,000.
25
Archer medical
Contributions toward Archer medical savings account
(1) Cannot exceed
None [dm]
savings account
(MSAs). Archer MSAs are tax-exempt trust or custodial
a taxpayer’s net
(MSA)
accounts, established with a U.S. financial institution,
earned income
contributions
used to save money exclusively for future medical
from the business in
IRC §223
expenses. Individuals must meet the fol owing
which the health
requirements to be eligible for an Archer MSA, including: insurance plan was
having a high deductible health plan (HDHP); having no
established.
other health or Medicare coverage; and being either a
(2) For those with
small employer or self-employed (or the spouse of a self-
individual coverage:
employed individual).
65% of the annual
deductible.
For those with
family coverage:
75% of the annual
deductible.
26
Work-related
Unreimbursed moving expenses incurred during the
None None NA

moving
taxable year in connection with the commencement of
expenses
work by the taxpayer as an employee or as a self-
IRC §217
employed individual at a new principal place of work that
is at least 50 miles farther from the prior residence.
CRS-11

Tax Deductions for Individuals: A Summary
Tax
1040
Summary of
Annual
Income Limits
Expenditure,
Linea Provision
Deductible Expense
Deduction Limit
and Phaseouts
in Billionsb
28
Retirement plan A self-employed individual may deduct contributions to a Contributions
None NA
contributions
Simplified Employment Plan (SEP), Savings Incentive
cannot exceed an
for the self-
Match Plan for Employees of Smal Employers (SIMPLE),
amount equal to
employed
or Keogh plan.
25% of pay up to a
IRC §401-408
maximum amount
indexed to inflation:
SEP and Keogh:
$51,000 (2013),
$52,000 (2014).
SIMPLE: $12,000
(2013), and $12,000
(2014).
Participants aged 50
and older can make
additional
contributions of up
to $2,500 in both
2013 and 2014.
CRS-12

Tax Deductions for Individuals: A Summary
Tax
1040
Summary of
Annual
Income Limits
Expenditure,
Linea Provision
Deductible Expense
Deduction Limit
and Phaseouts
in Billionsb
32
Retirement
Taxpayers may deduct qualified retirement
The lesser of
For active
FY2013: $14.9
savings,
contributions, such as a 401(k) plan or a traditional IRA,
$5,500 or 100% of
participants in
including
general y limited to $5,000 (increased by $1,000 of
compensation.
certain pension
FY2014: $17.6
traditional
catch-up contributions for taxpayers aged 50 and over),
The ceiling is
plans, the
individual
adjusted for inflation occurring after 2008 (it remains
indexed for inflation deduction amount
retirement
$5,000 for 2012).
in $500 increments.
is phased-out
accounts (IRAs)
Individuals aged 50
proportionately
IRC §219
ATRA permanently expanded the availability of “in-plan
and older may make over the fol owing
Roth conversions,” allowing virtually all traditional
an additional catch-
inflation-adjusted
employer-sponsored retirement account balances [like
up contribution of
AGI ranges:
funds in a 401(k) plan] to be transferred to employer-
$1,000.
sponsored Roth accounts [like Roth 401(k) plans]. By
A married taxpayer
MFJ: $95,000-
electing to convert a non-Roth account to a Roth
may make
$115,000 (2013),
account, an employee pays tax at the time the funds are
deductible
$96,000-$116,000
rol ed over or converted. However, when an employee
contributions to an
(2014),
ultimately withdraws funds from these Roth accounts
IRA for the benefit
Taxpayers
they will not be subject to taxation.c
of the spouse up to: whose spouses
2013: $5,500
are active
($6,500 if over 50)
participants:
$178,000-
2014: $5,500
$188,000 (2013),
($6,500 if over 50)
$181,000-
$191,000 (2014),
Other
taxpayers:
$59,000-$69,000
(2013), $60,000-
$70,000 (2014)
CRS-14

Tax Deductions for Individuals: A Summary
Tax
1040
Summary of
Annual
Income Limits
Expenditure,
Linea Provision
Deductible Expense
Deduction Limit
and Phaseouts
in Billionsb
33
Interest on
Interest paid on a qualified student loan is deductible in
$2,500, subject to
Inflation-adjusted
FY2013: $1.3
Education Loans the year that the interest was paid.
income phaseouts:
phaseout:
IRC §221
FY2014: $1.4
MFJ: $100,000-
MFJ: $125,000-
$130,000
$155,000 (2013),
$130,000-
Other taxpayers:
$160,000 (2014)
$50,000-$60,000
Other

taxpayers:
$60,000-$75,000
(2013), $65,000-
$80,000 (2014)
34
Qualified
Includes costs related to qualified tuition, fees, room and
Up to $4,000 or
Taxpayers could
FY2013: $0.7
Tuition and
board, books, and supplies.
$2,000, depending
deduct up to
Related
on AGI.
$4,000 or up to
FY2014: $0.2
Expenses
This “tax extender” provision expires after the 2013 tax year
$2,000 of qualified
IRC §222
(2014 filing season). The Tax Extender Act of 2013 (S.
tuition and related
1859) would provide a one-year extension this provision,
expenses
through tax year 2014 (2015 filing season).
depending on their
AGI fell between
the following
ranges in 2013:
$65,000 or less
($130,000 MFJ):
$4,000.
$65,001-$80,000
($160,000 MFJ):
$2,000.
$80,000+
($160,000+
MFJ): $0.
Source: Internal Revenue Service (IRS), Internal Revenue Bulletin No. 2013-47, November 18, 2013, at http://www.irs.gov/pub/irs-irbs/irb13-47.pdf; IRS, Tax Guide 2012 for
Individuals, Publication 17, at http://www.irs.gov/pub/irs-pdf/p17.pdf; IRS, various publications, at http://www.irs.gov/pub/; IRS, 2012Form 1040, at http://www.irs.gov/pub/
CRS-15

Tax Deductions for Individuals: A Summary
irs-pdf/f1040.pdf; IRS, Cost-of-Living (COLA) Increases for Dol ar Limitations on Benefits and Contributions, at http://www.irs.gov/Retirement-Plans/COLA-Increases-for-
Dollar-Limitations-on-Benefits-and-Contributions; Joint Committee on Taxation, Estimates of Federal Tax Expenditures, For Fiscal Years 2012-2017, 113th Congress, 1st
session, February 1, 2013, JCS-1-13 (Washington: GPO, 2013); and U.S. Congress, Senate Committee on the Budget, Tax Expenditures: Compendium of Background
Materials on Individual Provisions, committee print, prepared by the Congressional Research Service, 111th Congress, 2nd session, December 2010, 111-58 (Washington:
GPO, 2010).
Notes:
a. Line numbers refer to the 2012 Schedule A to the Form 1040.
b. Tax expenditures estimates are for individuals only, not corporations. Estimates below JCT’s de-minimus amount of $50 million, as per its February 2013 estimates,
are denoted by [dm]. Provisions without a JCT tax expenditure amount are denoted by NA.
c. For more information on ATRA’s changes to the tax treatment of IRAs, see CRS Report R42894, An Overview of the Tax Provisions in the American Taxpayer Relief Act
of 2012 , by Margot L. Crandall-Hollick.

CRS-16

Tax Deductions for Individuals: A Summary
Table 2. Summary of Below-the-Line, Itemized Tax Deductions for Individuals
Annual
Income Limits
Tax
Schedule
Summary of
Deduction
and Phaseouts,
Expenditure,
A Linea Provision
Deductible Expense
Floor or Limit
2012
in Billionsb
1
Medical and
Includes the diagnosis, cure, mitigation, treatment, or
2012: Expenses are
None
FY2013: $11.4
dental expenses
prevention of disease, or for the purpose of affecting any deductible only if
IRC §213
structure or function of the body; lodging and
they exceed the
FY2014: $12.4
transportation costs related to essential medical care;
floor of 7.5% of
qualified long-term care services; insurance covering
adjusted gross
medical care for any qualified long-term care insurance
income (AGI).
contract; and prescribed drugs.
2013: This floor is
increased to 10% of
AGI.
5 and 7
State and local
Taxpayers who itemize can choose between deducting
None None
FY2013: $50.3
nonbusiness,
either state and local income taxes or sales taxes, but
income, sales, and
not both. State and local income taxes are withheld from
FY2014: $51.8
personal property
wages during the year, as they appear on Form W-2.
taxes
Non-business state or local property taxes are also
IRC §164
deductible.
The option to deduct sales taxes in lieu of income taxes “tax
extender” provision expires after the 2013 tax year (2014
filing season). The Tax Extender Act of 2013 (S. 1859) would
provide a one-year extension this provision, through tax year
2014 (2015 filing season).
6
Real estate taxes
Tax filers can claim an itemized deduction for property
None None
FY2013: $27.0
IRC §164
taxes paid on owner-occupied residences.
FY2014: $28.6
8
Federal estate tax
The IRS allows any recipient of current or future IRD to
None None
NA
on income in
deduct any properly allocable expenses against the
respect of a
income that was not claimed on the decedent’s final tax
decedent (IRD)
return for estate tax purposes. Common items include
IRC §691(c)
fiduciary fees, commissions paid to dispose of assets, and
state income taxes.
CRS-17

Tax Deductions for Individuals: A Summary
Annual
Income Limits
Tax
Schedule
Summary of
Deduction
and Phaseouts,
Expenditure,
A Linea Provision
Deductible Expense
Floor or Limit
2012
in Billionsb
21
Unreimbursed
Includes miscel aneous job-related unreimbursed
Subject to the
None
NA
employee
expenses, such as travel costs, union dues, job-related
combined expenses
expenses
education, uniforms, and subscriptions to professional
floor in excess of
IRC §162
journals.
2% of AGI.
22
Tax preparation
Tax preparation fees and expenses, including the cost of
Subject to the
None NA
fees
tax preparation software programs and tax publications,
combined expenses
IRC §212
are deductible.
floor in excess of
2% of AGI.
23
Other financial
Includes expenses such as investment management fees,
Subject to the
None NAd
and investment
safe deposit box rental fees, and transportation to an
combined expenses
expenses
investment broker’s or advisor’s office.
floor in excess of
IRC §212
2% of AGI.
28
Gambling losses
Wagering losses are deductible only to the extent of the
Subject to the
None NA
that offset
taxpayer’s gains from similar transactions (USC §165(d);
combined expenses
gambling winnings Reg Sec 1.165-10). Nonbusiness gambling losses are
floor in excess of
IRC §165
deductible only as itemized deductions. If gambling is
2% of AGI.
conducted as a business, the losses are deductible as
business losses, but only to the extent of gains.
Gambling losses
claimed as a
deduction cannot
exceed winnings in
the same year.
28
Impairment-
Qualified impairment-related work expenses are
None None

NA
related work
deductible. These include expenses, such as: prosthetics,
expenses of a
specialized office equipment, supplies, or an attendant
person with
during work hours.
disabilities
ICR §67(d)
Source: Internal Revenue Service (IRS), Internal Revenue Bulletin No. 2013-47, November 18, 2013, at http://www.irs.gov/pub/irs-irbs/irb13-47.pdf; IRS, Tax Guide 2012 for
Individuals, Publication 17, at http://www.irs.gov/pub/irs-pdf/p17.pdf; IRS, various publications, at http://www.irs.gov/pub/; IRS, 2012Form 1040, at http://www.irs.gov/pub/
irs-pdf/f1040.pdf; IRS, Cost-of-Living (COLA) Increases for Dol ar Limitations on Benefits and Contributions, at http://www.irs.gov/Retirement-Plans/COLA-Increases-for-
Dollar-Limitations-on-Benefits-and-Contributions; Joint Committee on Taxation, Estimates of Federal Tax Expenditures, For Fiscal Years 2012-2017, 113th Congress, 1st
session, February 1, 2013, JCS-1-13 (Washington: GPO, 2013); and U.S. Congress, Senate Committee on the Budget, Tax Expenditures: Compendium of Background
CRS-21

Tax Deductions for Individuals: A Summary
Materials on Individual Provisions, committee print, prepared by the Congressional Research Service, 111th Congress, 2nd session, December 2010, 111-58 (Washington:
GPO, 2010).
Notes:
a. Line numbers refer to the 2012 Schedule A to the Form 1040.
b. Tax expenditures estimates are for individuals only, not corporations. Estimates below JCT’s de-minimus amount of $50 million, as per its February 2013 estimates, are
denoted by [dm]. Provisions without a JCT tax expenditure amount are denoted by NA.
c. This estimate is the sum of the three different categories of charitable giving included in JCT’s tax expenditures estimates that were conducted in 2013.
d. JCT did not provide a tax expenditure estimate for this provision, as it is considered to be a negative tax expenditure (i.e., revenue net-gain).
CRS-22

Tax Deductions for Individuals: A Summary

Author Contact Information

Sean Lowry

Analyst in Public Finance
slowry@crs.loc.gov, 7-9154

Congressional Research Service
23