The Tax Cuts and Jobs Act raised the standard deduction significantly, which means 90%+ of Americans no longer itemize. But that doesn't mean there's nothing to optimize. Above-the-line deductions reduce your AGI regardless of whether you itemize — and they're widely missed.
2026 Standard deduction amounts
| Filing status | 2026 standard deduction |
|---|---|
| Single | $15,000 |
| Married Filing Jointly | $30,000 |
| Head of Household | $22,500 |
Above-the-line deductions (reduce AGI even if you take standard deduction)
- Traditional IRA contributions: Up to $7,000/year ($8,000 if 50+). Income limits apply for deductibility if you have a workplace plan.
- HSA contributions: $4,300 single / $8,550 family in 2026. Triple tax advantage — pre-tax in, tax-free growth, tax-free medical withdrawals.
- Student loan interest: Up to $2,500. Income phase-out starts at $75,000 (single).
- Self-employed health insurance premiums: 100% deductible above the line. One of the most valuable deductions for freelancers and sole proprietors.
- Self-employment taxes (half): The IRS lets you deduct the employer-equivalent portion of SE tax.
- Alimony paid (pre-2019 agreements): Still deductible for agreements before January 1, 2019.
- Teacher classroom expenses: Up to $300 for K-12 educators purchasing supplies.
Tax credits vs deductions: the key difference
A deduction reduces taxable income. A $1,000 deduction saves you $220 if you're in the 22% bracket. A credit reduces tax owed dollar for dollar. A $1,000 credit saves you exactly $1,000. Credits are more powerful.
The most valuable credits in 2026
| Credit | Max value | Who qualifies |
|---|---|---|
| Child Tax Credit | $2,000/child | Children under 17, income limits apply |
| Earned Income Tax Credit | Up to $7,830 | Low-moderate income, earned income required |
| Child and Dependent Care | $1,050-$2,100 | Working parents with childcare expenses |
| American Opportunity Credit | $2,500/student | First 4 years of college |
| Saver's Credit | Up to $1,000 | Low-income retirement savers |
| EV Tax Credit | Up to $7,500 | New EV purchases meeting income/price limits |
The deduction most self-employed miss
The Qualified Business Income (QBI) deduction lets eligible self-employed individuals and pass-through business owners deduct up to 20% of qualified business income. For a freelancer earning $80,000 net, this can be a $16,000 deduction — reducing taxable income by $16,000 at no additional cost. It phases out at higher incomes and has industry restrictions. A CPA can determine if you qualify.
The Qualified Business Income (QBI) deduction lets eligible self-employed individuals and pass-through business owners deduct up to 20% of qualified business income. For a freelancer earning $80,000 net, this can be a $16,000 deduction — reducing taxable income by $16,000 at no additional cost. It phases out at higher incomes and has industry restrictions. A CPA can determine if you qualify.
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