Tax Deductions You're Missing in 2025

The average taxpayer overpays by $1,000-3,000/year in taxes.

Why? They miss deductions they're entitled to.

Maybe you're taking the standard deduction when itemizing would save you more. Maybe you're not tracking business expenses. Maybe you don't know about the home office deduction, educator expenses, or student loan interest deduction.

This guide covers 50+ tax deductions most people miss, organized by category.

Calculate your tax savings →

Standard vs Itemized Deduction: Which Should You Take?

The Choice

Every taxpayer chooses one:

1. Standard deduction (simple, no records needed)
2. Itemized deductions (more complex, requires records, but can save more)

You take whichever is HIGHER.

2025 Standard Deduction Amounts

Filing Status	Standard Deduction
Single	$14,600
Married Filing Jointly	$29,200
Married Filing Separately	$14,600
Head of Household	$21,900

Age 65+ or blind: Add $1,550 (single) or $1,250 (married)

When to Itemize

Itemize if your total itemized deductions exceed the standard deduction.

Common itemized deductions:

• State and local taxes (SALT): up to $10,000
• Mortgage interest: varies
• Charitable contributions: varies
• Medical expenses: over 7.5% of AGI
• Casualty losses (disasters): varies

Example (worth itemizing):

• SALT: $10,000
• Mortgage interest: $15,000
• Charity: $5,000
• Total itemized: $30,000
• Standard deduction: $29,200
• Itemizing saves $800 in taxable income (~$200 in taxes)

Example (not worth itemizing):

• SALT: $8,000
• Mortgage interest: $6,000
• Charity: $2,000
• Total itemized: $16,000
• Standard deduction: $29,200
• Take standard deduction (saves $13,200 more)

Bunching Strategy

If you're close to itemizing threshold:

Bunch deductions into one year:

• Donate 2 years of charity in year 1
• Pay property taxes early
• Prepay state income tax (if allowed)
• Itemize in year 1
• Take standard deduction in year 2

Example:

• Normal: $14,000 itemized each year (below $29,200 standard)
• Bunched: $28,000 itemized year 1, $0 year 2
• Year 1: Itemize (save $28,000 vs $29,200 = close)
• Year 2: Standard deduction ($29,200)
• Total: $28,000 + $29,200 = $57,200 over 2 years
• vs Normal: $29,200 + $29,200 = $58,400 over 2 years (taking standard both years)

Actually, bunching doesn't help in this example. Only beneficial if bunched total exceeds standard deduction.

Better example:

• Normal: $20,000 itemized each year
• Bunched: $40,000 year 1, $0 year 2
• Year 1: Itemize ($40,000 vs $29,200 standard) → Save $10,800
• Year 2: Standard ($29,200)
• Total: $69,200 vs $58,400 (two standard deductions)
• Benefit: $10,800 extra deductions

Above-the-Line Deductions (Don't Need to Itemize)

These deductions reduce your Adjusted Gross Income (AGI) and can be taken even if you use the standard deduction.

1. Retirement Contributions

Traditional IRA:

• Deduct up to $7,000 (2025)
• Age 50+: $8,000 (includes $1,000 catch-up)
• Income limits apply if covered by employer retirement plan

Solo 401(k) (self-employed):

• Employee contribution: $23,000
• Employer contribution: up to 25% of net self-employment income
• Total limit: $69,000 (or $76,500 age 50+)

SEP IRA (self-employed):

• Up to 25% of net self-employment income
• Limit: $69,000

Tax savings example:

• Max Traditional IRA: $7,000
• Tax bracket: 24%
• Tax savings: $1,680

2. Health Savings Account (HSA)

Triple tax advantage:

1. Contributions are tax-deductible
2. Growth is tax-free
3. Withdrawals for medical expenses are tax-free

2025 Limits:

• Individual: $4,150
• Family: $8,300
• Age 55+: Add $1,000

Requirements:

• Must have high-deductible health plan (HDHP)
• HDHP minimum deductible: $1,650 (individual), $3,300 (family)

Tax savings example:

• Max family HSA: $8,300
• Tax bracket: 24%
• SE tax savings (if self-employed): 15.3%
• Total tax savings: $3,263 (incredible!)

Pro tip: Max out your HSA every year. It's the best tax-advantaged account available.

3. Self-Employment Tax Deduction

If you're self-employed:

• Pay 15.3% self-employment tax
• Deduct half (employer portion) on Form 1040
• Reduces income tax (but not SE tax)

Example:

• Net self-employment income: $100,000
• SE tax: $14,130
• Deductible: $7,065
• Tax savings: ~$1,700-2,500 (depending on bracket)

4. Self-Employed Health Insurance

If you're self-employed:

• Deduct 100% of health insurance premiums
• Covers you, spouse, dependents
• Cannot exceed net self-employment income

Example:

• Health insurance premiums: $12,000/year
• Tax bracket: 24%
• Tax savings: $2,880

5. Student Loan Interest

Deduct up to $2,500 in student loan interest paid

Requirements:

• Loan must be for you, spouse, or dependent
• Used for qualified education expenses
• Income limits: Phases out $75,000-$90,000 (single), $155,000-$185,000 (married)

Example:

• Student loan interest paid: $3,000
• Deductible: $2,500 (max)
• Tax bracket: 22%
• Tax savings: $550

6. Educator Expenses

If you're a K-12 teacher:

• Deduct up to $300 of unreimbursed classroom expenses ($600 if married both educators)
• Supplies, books, equipment, software, PPE

Example:

• Spent $500 on classroom supplies
• Deductible: $300
• Tax bracket: 22%
• Tax savings: $66

7. Moving Expenses (Military Only)

Active duty military moving under orders:

• Deduct unreimbursed moving expenses
• Moving truck, travel, lodging, storage
• Use Form 3903

Everyone else: Moving expenses NOT deductible (eliminated 2018)

8. Alimony Paid (Pre-2019 Divorces)

If divorced before 2019:

• Alimony paid is deductible
• Recipient reports as income

If divorced 2019 or later:

• Alimony NOT deductible (tax law changed)
• Recipient doesn't report as income

9. IRA Contributions for Non-Working Spouse

Spousal IRA:

• Non-working spouse can contribute to IRA
• Based on working spouse's income
• Up to $7,000 ($8,000 age 50+)

Tax savings example:

• Contribute $7,000 to spousal IRA
• Tax bracket: 24%
• Tax savings: $1,680

Itemized Deductions

If your total itemized deductions exceed the standard deduction, itemize using Schedule A.

State and Local Taxes (SALT)

Deduct the GREATER of:

• State/local income taxes OR
• State/local sales taxes

PLUS:

• Property taxes on real estate

LIMIT: $10,000 total ($5,000 if married filing separately)

What's included:

• State income tax withheld (or paid)
• Local income tax (NYC, Philly, etc.)
• Property tax on primary residence
• Property tax on second home/vacation home
• Sales taxes (if you elect this instead of income tax)

What's NOT included:

• Federal income tax (never deductible)
• Car registration fees (only the portion based on value)

Example:

• State income tax: $8,000
• Property tax: $5,000
• Total: $13,000
• Deduction: $10,000 (capped)

Pro tip: In high-tax states (CA, NY, NJ), you'll hit the $10K cap easily. This is a big reason to consider relocating to a low-tax state.

Mortgage Interest

Deduct interest on:

• Primary residence mortgage
• Second home/vacation home mortgage
• Home equity loan (if used to buy, build, or improve home)

Limits:

• Mortgages up to $750,000 ($375,000 MFS)
• Mortgages before 12/15/2017: $1 million limit (grandfathered)

What's deductible:

• Mortgage interest (Box 1 on Form 1098)
• Points paid to obtain mortgage (may need to amortize)
• Mortgage insurance premiums (if extended by Congress)

What's NOT deductible:

• Principal payments (not deductible)
• Home equity loan for non-home purposes (car, debt consolidation)

Example:

• Mortgage balance: $500,000
• Interest rate: 6%
• Annual interest: $30,000
• Deduction: $30,000

Tax savings:

• Tax bracket: 24%
• Tax savings: $7,200

Charitable Contributions

Cash donations:

• Up to 60% of AGI
• Must have receipt for $250+
• Must have written record for all donations

Non-cash donations (property, clothes, etc.):

• Up to 50% of AGI (for most charities)
• Must have receipt for $250+
• Need appraisal for items worth $5,000+

What qualifies:

• 501(c)(3) charities
• Churches, schools, hospitals
• Public charities
• Donor-advised funds

What doesn't qualify:

• GoFundMe, crowdfunding (usually not to qualified charity)
• Donations to individuals
• Raffle tickets, auction items (reduce by value received)
• Value of your time volunteering (not deductible)

Special strategies:

Donor-Advised Fund (DAF):

• Donate large amount in one year (bunch deductions)
• Get immediate tax deduction
• Grant to charities over multiple years

Example:

• Donate $50,000 of appreciated stock to DAF
• Deduct $50,000 in year 1
• Avoid capital gains tax on stock appreciation
• Grant $10,000/year for 5 years to charities
• Tax savings: $12,000 (24% bracket)

Qualified Charitable Distribution (QCD):

• Age 70½+
• Distribute up to $105,000 directly from IRA to charity
• Satisfies Required Minimum Distribution (RMD)
• Not included in income (better than deduction!)

Medical Expenses

Deduct medical expenses exceeding 7.5% of AGI

What's included:

• Doctor visits, hospital stays
• Prescription medications
• Health insurance premiums (if not deducted elsewhere)
• Long-term care insurance (limited)
• Dental, vision care
• Medical equipment (wheelchairs, hearing aids)
• Mileage to/from medical care (21¢/mile for 2025)

What's NOT included:

• Cosmetic surgery (unless medically necessary)
• Over-the-counter meds (unless prescribed)
• Health club dues
• Vitamins, supplements

Example:

• AGI: $100,000
• Medical expenses: $12,000
• Threshold (7.5%): $7,500
• Deduction: $4,500 ($12,000 - $7,500)

Tax savings:

• Tax bracket: 24%
• Tax savings: $1,080

Pro tip: This is hard to qualify for unless you have major medical expenses or low income. Bunch medical procedures into one year if possible.

Casualty and Theft Losses

Only for federally declared disasters

Requirements:

• Property located in federally declared disaster area
• Loss exceeds $100 per event
• Total losses exceed 10% of AGI

Example (2024 hurricane):

• Home damaged by federally declared disaster
• Loss: $50,000
• Insurance reimbursement: $30,000
• Net loss: $20,000
• Less $100: $19,900
• AGI: $100,000
• 10% threshold: $10,000
• Deduction: $9,900

NOT deductible:

• Regular theft (not federally declared disaster)
• Accidents
• Losses in non-disaster areas

Business Deductions (Self-Employed/1099)

If you're self-employed, you report business income and expenses on Schedule C.

Home Office Deduction

Two methods:

Simplified method:

• $5 per square foot
• Up to 300 square feet
• Maximum: $1,500

Actual expense method:

• Calculate % of home used for business
• Deduct that % of:
  • Rent or mortgage interest
  • Property taxes
  • Utilities (electric, gas, water)
  • Internet
  • Home insurance
  • Repairs and maintenance
  • Depreciation

Requirements:

• Regular and exclusive use
• Principal place of business
• Separate room or defined space

Example (actual method):

• Home: 2,000 sq ft
• Office: 200 sq ft (10%)
• Annual home expenses: $30,000
• Deduction: $3,000 (10% of $30,000)

Tax savings:

• Reduces self-employment income
• Saves SE tax (15.3%) + income tax (22-37%)
• $3,000 × 37.3% = $1,119 savings

Important: W-2 employees can NO LONGER deduct home office (eliminated 2018).

Vehicle Expenses

Two methods:

Standard mileage rate:

• 67¢ per mile (2025)
• Track all business miles
• Plus parking, tolls

Actual expense method:

• Gas, oil, repairs
• Insurance, registration
• Car payments (depreciation)
• Multiply by business use %

Example (standard mileage):

• Business miles: 10,000
• Deduction: 10,000 × $0.67 = $6,700
• Tax savings (37.3%): $2,499

Example (actual):

• Total car expenses: $12,000
• Business use: 60%
• Deduction: $7,200

Requirements:

• Keep mileage log (date, miles, purpose)
• Track business vs personal use
• Commuting is NOT deductible

Equipment and Supplies

Section 179 deduction:

• Deduct full cost of equipment in year 1 (up to $1,220,000)
• Computers, machinery, tools, furniture, software

Bonus depreciation:

• 60% first-year depreciation (2025, phases down from 100%)
• For qualified property

Regular supplies:

• Office supplies, software subscriptions
• Deduct in year purchased

Example:

• Buy $15,000 computer setup
• Deduct $15,000 immediately (Section 179)
• Tax savings: $15,000 × 37.3% = $5,595

Business Travel

Deduct:

• Airfare, train, rental car
• Hotel, Airbnb
• Meals (50% deductible)
• Conference/event registration
• Taxi, Uber, parking

Requirements:

• Primarily for business (not vacation)
• Keep receipts
• Document business purpose

Example:

• Conference trip: $3,000 (airfare, hotel, meals)
• 100% business purpose
• Meals portion: $500
• Deductible: $2,500 + ($500 × 50%) = $2,750
• Tax savings: $1,026

Professional Development

Deduct:

• Courses, certifications
• Books, subscriptions
• Coaching, mentorship
• Conference tickets

Requirements:

• Related to current business
• Maintains or improves skills
• Not to learn new trade

Example:

• Marketing course: $2,000
• Tax savings: $746

Marketing and Advertising

Deduct:

• Website development and hosting
• Google Ads, Facebook Ads
• SEO, content marketing
• Business cards, branding
• Social media management tools

Example:

• Annual marketing: $10,000
• Tax savings: $3,730

Contract Labor

Deduct:

• Payments to contractors (1099 workers)
• Virtual assistants
• Freelancers, consultants
• Outsourced services

Requirements:

• Issue 1099-NEC if paid $600+ (unless corporation)
• Keep records of payments

Example:

• Pay VA $12,000/year
• Tax savings: $4,476

Business Insurance

Deduct:

• Professional liability insurance
• General liability insurance
• Business property insurance
• Errors & omissions insurance

Internet and Phone

Deduct business portion:

• Home internet: Often 50-100% if working from home
• Cell phone: Business use %

Example:

• Internet: $100/month = $1,200/year
• Business use: 80%
• Deduction: $960

Tax Credits (Better Than Deductions!)

Tax credits reduce tax owed dollar-for-dollar (better than deductions which only reduce taxable income).

Child Tax Credit

$2,000 per qualifying child under 17

Refundable up to $1,700 (can get refund even if no tax owed)

Income phase-out:

• Begins at $200,000 (single) or $400,000 (married)

Example:

• 2 kids
• Total credit: $4,000
• Reduces tax by $4,000 (not just taxable income)

Child and Dependent Care Credit

20-35% of up to $3,000 expenses (1 child) or $6,000 (2+ children)

Requirements:

• Child under 13
• Care needed so you can work
• Expenses paid to qualified provider

Example:

• Daycare: $10,000/year (2 kids)
• Credit base: $6,000 (max)
• Credit rate: 20% (high income)
• Credit: $1,200

Note: Often better to use Dependent Care FSA ($5,000 pre-tax) instead if available.

Earned Income Tax Credit (EITC)

Refundable credit for low-to-moderate income workers

2025 Maximum Credits:

• No children: $632
• 1 child: $4,213
• 2 children: $6,960
• 3+ children: $7,830

Income limits vary by filing status and number of children

Example:

• Single, 2 kids, income $25,000
• EITC: ~$6,000+
• Can get refund even if no tax paid

American Opportunity Tax Credit

Up to $2,500 per student for first 4 years of college

100% of first $2,000 + 25% of next $2,000 in expenses

40% refundable (up to $1,000 even if no tax owed)

Requirements:

• Enrolled at least half-time
• Pursuing degree
• No felony drug conviction
• Income limits: $80,000-$90,000 (single), $160,000-$180,000 (married)

Example:

• Tuition: $10,000
• Credit: $2,500
• If tax owed is $1,500, get $1,000 refund

Lifetime Learning Credit

Up to $2,000 per return (not per student)

20% of up to $10,000 in expenses

Not refundable

Requirements:

• Taking courses to acquire/improve job skills
• No degree required
• Income limits: $80,000-$90,000 (single), $160,000-$180,000 (married)

Use if:

• Not eligible for American Opportunity Credit
• Graduate school
• Continuing education

Retirement Saver's Credit

10-50% of retirement contributions up to $2,000

Maximum credit: $1,000 (single) or $2,000 (married)

Requirements:

• Low-to-moderate income
• Contribute to IRA, 401(k), 403(b), etc.

2025 Income Limits:

AGI	Credit Rate
$0-$23,250 (single)	50%
$23,251-$25,250	20%
$25,251-$38,750	10%

Example:

• AGI: $22,000 (single)
• IRA contribution: $2,000
• Credit: $2,000 × 50% = $1,000

Plus you get the $2,000 deduction!

Electric Vehicle Credit

Up to $7,500 for new qualified EVs

Requirements:

• Vehicle MSRP under $55,000 (cars) or $80,000 (trucks/SUVs)
• Income under $150,000 (single) or $300,000 (married)
• Battery assembled in North America
• Final assembly in North America

Used EV credit:

• Up to $4,000
• Vehicle under $25,000
• At least 2 years old

Residential Energy Credits

30% of costs for:

• Solar panels
• Solar water heaters
• Geothermal heat pumps
• Wind turbines
• Battery storage (if installed with solar)

No maximum limit through 2032

Example:

• Solar panels: $20,000
• Credit: $6,000

Also:

• Energy-efficient home improvements: Up to $1,200/year
• Heat pumps, water heaters, windows, doors, insulation

Commonly Missed Deductions

1. Job Search Expenses (If Self-Employed)

If job hunting in same field while self-employed:

• Resume services
• Career coaching
• Travel to interviews

2. Hobby Income Loophole

If you have a hobby that makes money:

• Report income
• Can deduct expenses up to income (don't need to itemize)

3. Gambling Losses

Can deduct gambling losses up to gambling winnings

Requirements:

• Itemize
• Keep records (receipts, statements)

Example:

• Gambling winnings: $5,000 (reported as income)
• Gambling losses: $7,000
• Deductible losses: $5,000 (can't exceed winnings)
• Net effect: $0 taxable gambling income

4. State Tax Refund (If Itemized Prior Year)

If you itemized last year and got a state tax refund:

• May need to report refund as income this year
• But only the portion that gave you a tax benefit

5. Reinvested Dividends

Not a deduction, but affects capital gains:

• When you sell stock/mutual funds
• Reinvested dividends increase your basis
• Reduces capital gains tax

Example:

• Bought stock: $10,000
• Reinvested dividends: $2,000
• Sold for: $15,000
• Basis: $12,000 (not $10,000)
• Capital gain: $3,000 (not $5,000)
• Tax savings: ~$400

6. Medicare Premiums (If Self-Employed)

Medicare Part B & D premiums:

• Deductible if self-employed
• Part of self-employed health insurance deduction

7. Jury Duty Pay Given to Employer

If you had to give jury duty pay to employer:

• Employer makes you report it as income
• You can deduct the amount you gave employer
• Above-the-line deduction

8. Safe Deposit Box (For Investments)

If used to store investment documents:

• May be deductible as investment expense
• Subject to 2% AGI floor (currently suspended)

9. Tax Preparation Fees (If Self-Employed)

Schedule C portion:

• TurboTax, H&R Block, CPA fees
• The portion allocable to Schedule C is deductible
• Personal tax prep NOT deductible (eliminated 2018)

10. Uniform Costs (Not Reimbursed)

If employer requires specific clothing:

• Deductible if not suitable for everyday wear
• Dry cleaning of uniforms
• Requires itemizing (2% AGI floor, currently suspended)

State-Specific Deductions

Many states offer additional deductions beyond federal:

Common State Deductions

529 Plan Contributions:

• Many states give deduction for contributions to state 529 plan
• Varies by state ($2,000-$10,000 typical)

Property Tax (Additional):

• Some states allow full property tax deduction (no $10K cap)

Retirement Contributions (State):

• Some states give extra deduction for retirement contributions

Example state deductions:

New York:

• 529 contribution: Up to $10,000 deduction
• Pension income: Up to $20,000 excluded

Pennsylvania:

• Retirement income: Fully exempt
• 529 contribution: No state deduction (but withdrawals tax-free)

California:

• No deduction for 529 contributions
• Stricter rules on many deductions

Calculate your state-specific taxes →

Tax Deduction Mistakes to Avoid

Mistake 1: Not Keeping Records

The problem:

• Claim deductions without receipts
• Get audited
• Can't prove expenses
• Deductions disallowed + penalties

The fix:

• Save ALL receipts
• Use accounting software (QuickBooks, FreshBooks, Wave)
• Photo receipts with phone app (Expensify, Shoeboxed)

Mistake 2: Mixing Personal and Business

The problem:

• Use business account for personal expenses
• Deduct personal expenses as business
• Audit red flag

The fix:

• Separate accounts
• Separate credit cards
• Track everything

Mistake 3: Forgetting Mileage Log

The problem:

• Estimate business miles
• Can't prove in audit
• Deduction disallowed

The fix:

• Use app (MileIQ, Stride, Everlance)
• Auto-track with GPS
• Note purpose of each trip

Mistake 4: Not Taking Deduction Because "Might Trigger Audit"

The problem:

• Fear of audit stops you from claiming legitimate deductions
• Overpay taxes by thousands

The fix:

• Take every deduction you're legally entitled to
• Keep good records
• Don't fear audit if you're honest

Audit rates are LOW:

• Average taxpayer: <0.5% chance
• Income under $200K: ~0.2% chance
• Even if audited: If you have records, you'll be fine

Mistake 5: Not Deducting Half of SE Tax

The problem:

• Self-employed pay SE tax
• Forget to deduct employer portion on Form 1040
• Overpay income tax by $1,500-3,000

The fix:

• Always deduct half of SE tax (Form 1040 Line 15)
• Tax software does this automatically

Tools and Resources

Tracking Tools

Mileage:

• MileIQ, Stride, TripLog, Everlance

Receipts:

• Expensify, Shoeboxed, Receipt Bank

Accounting:

• QuickBooks Self-Employed, FreshBooks, Wave (free), Xero

Tax Software

DIY:

• TurboTax, H&R Block, TaxAct, FreeTaxUSA

With Help:

• TurboTax Live, H&R Block Online with Tax Pro

Hire a Pro:

• Find CPA if income over $75K, self-employed, or complex situation

IRS Resources

IRS Publication 17: Your Federal Income Tax (comprehensive guide)

IRS Free File: Free tax filing if income under $79,000

IRS Withholding Calculator: Adjust W-4 to optimize withholding

Conclusion

Key takeaways:

✅ Standard deduction (2025): $14,600 (single), $29,200 (married)

✅ Itemize if: Total itemized deductions exceed standard deduction

✅ Above-the-line deductions: IRA, HSA, self-employment tax, student loan interest, educator expenses

✅ Itemized deductions: SALT ($10K cap), mortgage interest, charity, medical (>7.5% AGI)

✅ Business deductions (self-employed): Home office, vehicle, equipment, travel, marketing

✅ Tax credits (better than deductions): Child Tax Credit, EITC, education credits, EV credit, energy credits

✅ Keep records: Receipts, mileage logs, bank statements

✅ Don't fear audits: Take legitimate deductions, keep good records

Bottom line:

Most taxpayers miss $1,000-5,000 in deductions every year. That's $25,000-125,000 overpaid over 25 years!

The solution:

1. Track everything
2. Know what's deductible
3. Keep records
4. Use tax software or hire a pro
5. Review this guide annually

Next step: Use our calculator to see how deductions affect your take-home pay.

Pro tip: If self-employed or high income ($75K+), spend $300-1,000 on a CPA consultation. They'll find deductions worth 5-10× their fee.

Calculate your tax savings now →