Tax Myths Around Deductions That Too Many People Still Believe

Mortgage interest on a primary (and sometimes secondary) residence is deductible up to IRS limits - but only if you itemize. Property taxes are deductible up to a combined $10,000 cap for state and local taxes (SALT). Utilities, general repairs, and most routine maintenance costs are not deductible for a personal home. The IRS draws a firm line between personal living expenses and legitimate deductions.

The IRS uses two tests: an expense must be ordinary (common and accepted in your trade) and necessary (helpful and appropriate for your business). Meals are generally only 50% deductible, and only when there is a genuine business purpose. Personal vacations disguised as business travel, your home internet when you also use it personally, and clothing that isn't a required uniform typically don't qualify. Claiming inflated or personal expenses as business deductions is one of the most common audit triggers for self-employed filers.

Because the standard deduction is now high enough that most filers benefit from it, the majority of Americans receive no additional tax benefit from their donations at the federal level. If you do itemize, cash donations require a bank record or written acknowledgment from the charity. Donations of $250 or more require a written letter from the organization. Donated goods (clothing, furniture) must be valued at fair market value, not what you originally paid.

For employees who received a W-2, the home office deduction was effectively eliminated by the 2017 Tax Cuts and Jobs Act. Remote employees cannot claim it regardless of how many days they work from home. Self-employed individuals can claim it, but only if the space is used regularly and exclusively for business - a desk in your living room that doubles as your dining table does not count. The IRS offers two calculation methods: a simplified flat rate or the actual-expense method, both with specific requirements.

Refunds aren't a bonus; they're a return of money you already earned but didn't receive in your paycheck. If you consistently receive very large refunds, adjusting your W-4 withholding with your employer allows you to take home more each pay period. See our explainer on the difference between a tax return and a tax refund for a clearer picture of what each term actually means.

This threshold is higher than most people realize. If your AGI is $60,000, only unreimbursed medical expenses above $4,500 are deductible - and you must itemize to claim them. Expenses covered by insurance, employer health plans, or health savings accounts (HSAs) generally cannot be deducted again. Over-the-counter medications, cosmetic procedures, and gym memberships typically do not qualify unless specifically prescribed for a medical condition.