Why Reducing Taxable Income Is the Foundation
Every dollar of taxable income you eliminate saves you your marginal rate. In the 22% bracket, eliminating $10,000 saves $2,200 in federal taxes plus state.
Above-the-Line Deductions (Reduce AGI — No Itemizing Required)
1. Traditional 401(k) or 403(b): Up to $23,000 in 2024 ($30,500 if 50+).
2. Traditional IRA: Up to $7,000 ($8,000 if 50+). Fully deductible without a workplace plan; phased out with one depending on income.
Only 35% of workers with access to a 401(k) contribute enough to get the full employer match. Source: Vanguard How America Saves (2023) — Source
3. HSA: $4,150 individual / $8,300 family in 2024. Requires HDHP. Triple tax-advantaged.
4. SEP-IRA (self-employed): Up to 25% of net SE income, maximum $69,000 in 2024.
5. Student loan interest: Up to $2,500, subject to income limits.
6. Self-employed health insurance premiums: 100% deductible.
7. Half of self-employment tax: Deduct 50% of SE tax from gross income.
Itemized Deductions (If Over Standard Deduction)
8. Mortgage interest: Up to $750,000 of acquisition debt.
9. State and local taxes (SALT): Capped at $10,000.
10. Charitable contributions: Cash up to 60% of AGI; appreciated property up to 30%.
Americans donated $499 billion to charity in 2022. Source: Giving USA (2023) — Source
Business Deductions (Self-Employed)
11. Business expenses: Equipment, software, home office, vehicle, marketing, professional development.
12. Qualified Business Income (QBI) deduction: Pass-through business owners can deduct up to 20% of QBI, subject to income limits.
The QBI deduction saved self-employed and small business owners an estimated $50 billion in taxes in 2021. Source: Joint Committee on Taxation (2022) — Source
See tax deductions checklist, tax planning strategies, and the tax estimator guide.
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