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 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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About the author
Enrique 'Kike' Faúndez is an Information Systems and Management Control Engineer from Universidad de Chile, with master’s degrees in Finance from Universidad de Chile and Industrial Engineering from Pontificia Universidad Católica de Chile. He has 15+ years of experience in regulated financial services across finance, operations, and digital product development. He founded CashControlly in Santiago, Chile, with the conviction that personal financial control should not be a privilege, but an accessible and well-designed tool.
- Master's in Finance, Universidad de Chile
- Master's in Industrial Engineering, Pontificia Universidad Católica de Chile
- Information Systems and Management Control Engineer, Universidad de Chile
- AI and ITIL certifications
- 15+ years in regulated financial services
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