Understanding income tax deductions is essential for anyone looking to reduce their tax burden, especially commercial real estate professionals whose income can vary widely year to year. People often confuse deductions with tax credits, but they work differently. This article explains how deductions work and how they can help lower your taxable income.
What This Article Covers
- How above‑the‑line vs. itemized deductions work
- Major business, property, and investment deductions to know
- Limits, phaseouts, and documentation requirements
- How deductions fit into proactive tax plannin
What Is an Income Tax Deduction?
There are two broad categories of income tax deductions: deductions for adjusted gross income (AGI) and deductions from AGI.
Deductions for AGI reduce your gross income to arrive at your AGI. These are especially relevant for commercial real estate professionals who own their business or receive 1099 income. Common deductions for AGI include:
- Health savings account contributions made with after-tax money
- The employer portion of self-employment tax
- Retirement account contributions for self-employed individuals and small business owners
- Health insurance premiums for self-employed workers, including dental and long-term care insurance
- Traditional IRA contributions, subject to certain phaseout provisions
Other deductions are available as well. These include:
- Educator expenses for classroom supplies, up to $300 per individual
- Business expenses for certain government officials
- Moving expenses for active-duty military personnel
- Early withdrawal penalties of savings account and certificates of deposit
- Alimony payments for alimony agreements that were in place before 2019
- Student loan interest up to $2,500
Deductions from AGI are further deductions from your AGI. You subtract these deductions from you AGI to arrive at your taxable income.
The income tax you pay is based on your taxable income, subject to income tax credits and other adjustments.
Generally speaking, when people refer to “income tax deductions,” they are referring to these deductions from AGI. These deductions are the focus of the rest of this article.
What Types of Income Tax Deductions Are There?
For the 2025 tax year (with income tax filing due in April 2026), there are four types of income tax deductions:
- Standard deduction
- Itemized deductions
- Qualified business income deduction. This can be important for commercial real estate professionals who own their business or are 1099 income earners.
- Additional deductions due to new tax laws.
Standard deduction
A standard deduction is available to everyone one with taxable income. The amount varies depending on your filing status, your age, and whether you are blind. The table below summarizes the available deductions in 2025:
| Filing status | Standard Deduction | Additional Over-65 Deduction | Blindness Deduction |
| Single or Married filing separately | $15,750 | $6,000 per person over age 65, subject to limits for higher earners | $2,000 per blind person if Single; $1,600 per person if Married filing separately |
| Married filing jointly of Qualifying surviving spouse | $31,500 | $6,000 per spouse over age 65, subject to limits for higher earners | $1,600 per spouse |
| Head of household | $23,625 | $6,000 per person over age 65, subject to limits for higher earners | $6,000 per person over age 65, subject to limits for higher earners |
These deductions are cumulative. For example, a married couple filing jointly where both spouses are over 65 and blind could have a standard deduction of $46,700.
Itemized Deductions
Instead of taking the standard deduction, you can itemize if your allowable deductions exceed the standard deduction amount. Itemizing requires documentation and is subject to various limitations, but it can be beneficial in certain situations.
Allowable itemized deductions include:
- Medical and dental expenses in excess of 7.5% of your adjusted gross income
- State and local taxes, including sales taxes, income taxes, real estate taxes, and personal property taxes. Note that you can choose to deduct income taxes or sales taxes, but not both
- Mortgage interest paid on first and second homes
- Charitable gifts. There are many exclusions and limitations
- Casualty and theft losses from a federally declared disaster
- Miscellaneous deductions like gambling losses, casualty and theft losses from income-producing property, and others
Qualified Business Income Deduction
The Qualified Business Income (QBI) Deduction allows eligible sole proprietors, partnerships, and S corporations to deduct up to 20% of their business income. The deduction cannot exceed 20% of personal taxable income.
This deduction can be especially valuable for commercial real estate professionals who own their business or earn 1099 income, as it effectively reduces the amount of business income subject to tax.
OBBBA Deductions
The One Big Beautiful Bill Act (OBBBA), enacted in 2025, introduced additional deductions for certain taxpayers. These include:
- Deductible car loan interest on qualifying vehicles
- Enhanced deductions for senior citizens
How We Help Clients With Income Taxes
At Dominion Financial Advisors, we are not accountants or tax preparers. We don’t prepare or file income tax returns. That is a backward-looking approach: it tells you how much tax you owe based on what you did and earned last year. Instead, we take a forward-looking approach. We help you plan your income and tax-related options going into the future, so that you have plan that allows you to keep more of your money instead of sending it to the IRS. We can help you build and implement a future-oriented financial plan to help you avoid unexpected mistakes and regrets. Schedule a complimentary consultation today.