This isn’t a deduction, but it can save you money if it protects you from a penalty. Because our tax system operates on a pay-as-you earn basis, taxpayers typically must pay 90% of what they owe during the year via withholding or estimated tax payments.  If you don’t, and you owe more than $1,000 when you file your return, you can be hit with a penalty for underpayment of taxes.  The penalty works like interest on a loan as though you borrowed from the IRS the money you didn’t pay.  The current rate is 3%.  There are several exceptions to the penalty including a little known one that can protect taxpayers age 62 and older in the year they retire and the following year.  You can request a waiver of the penalty – using Form 2210- if you have reasonable cause such as not realizing you had to shift to estimated payments after a lifetime of meeting your obligation via withholding from your paycheck.