The information in this article is up to date for tax year 2024 (returns filed in 2025).
Tax season can be stressful, and many taxpayers are unaware of the deductions they might be missing out on. While some deductions are straightforward, others are often overlooked, resulting in higher tax liabilities than necessary. The good news is that by identifying and claiming commonly missed tax deductions, you can reduce your taxable income and potentially increase your tax refund. Here are the tax breaks that could help you keep more money in your pocket this year.
What Are Tax Deductions and Credits?
Tax deductions and tax credits are two powerful tools that can help you save money on your taxes. Tax deductions reduce your taxable income, which in turn lowers the amount of income that is subject to tax. Common deductions include expenses like mortgage interest, student loan interest, and charitable donations. On the other hand, tax credits provide a direct reduction to your tax bill, dollar for dollar. This means if you qualify for a $1,000 tax credit, your tax bill is reduced by $1,000. One important tax credit to be aware of is the earned income tax credit, which is designed to assist low- and moderate-income workers, including families with and without children. Both deductions and credits can significantly lower your tax liability, so it’s important to understand how they work and which ones you qualify for.
Commonly Missed Tax Deductions
1. Medical and Dental Expenses
You might be surprised to learn that medical and dental expenses are deductible, but many taxpayers miss this opportunity. While it’s true that these deductions are subject to a threshold (7.5% of your adjusted gross income, or AGI), you may still qualify for significant savings.
Here are a few commonly missed medical deductions:
- Long-term care: If you or a loved one require long-term care, those expenses could be deductible.
- Health insurance premiums: Self-employed individuals can deduct premiums paid for themselves and their families.
- Mileage for medical appointments: If you drive for medical care, you can deduct the mileage at the current IRS rate.
- Medical expenses for dependents: Even if your child or parent isn’t living with you, you may still be able to deduct their medical costs.
Make sure to keep all receipts and documentation related to these expenses throughout the year so you can claim them when filing your taxes.
2. Charitable Contributions
Donating to charity not only helps a good cause but can also lead to tax savings. Many people don’t realize that both cash and non-cash donations can be deducted.
- Non-cash donations: Items like clothing, household goods, and even furniture can be deducted if donated to a qualified charity.
- Volunteer expenses: Did you know you can deduct mileage and certain expenses associated with volunteering? The IRS allows you to deduct 14 cents per mile for volunteer driving, as well as costs for supplies or uniforms.
To ensure you can claim these deductions, keep a record of every donation and ensure the organization is IRS-approved. Also, remember that deductions for donations require receipts—whether it’s for money or goods.
3. Home Office Deduction
If you work from home and you’re self-employed, don’t miss out on the home office deduction
The home office deduction can be claimed using two methods:
- Simplified Method: Deduct $5 for every square foot of your home used for business (up to 300 square feet).
- Regular Method: Deduct a portion of your home expenses, such as rent, utilities, and insurance, based on the percentage of your home used for business.
To qualify, your home office must be used exclusively for business purposes, so be sure to keep detailed records of your workspace and related expenses.
4. State Sales Tax Deduction
Taxpayers living in states without an income tax may benefit from the state sales tax deduction. This often goes unclaimed because people don’t realize they have the option to choose between deducting state income taxes or sales taxes on their federal returns.
For major purchases (like a car or home renovation materials), the sales tax deduction can be a big benefit. The IRS provides a tables-based method to estimate your sales tax deduction, but if you’ve made large purchases, it’s worth calculating the actual sales tax you paid.
5. Student Loan Interest Deduction
The student loan interest deduction is a valuable above-the-line deduction that can help reduce your taxable income. If you’ve been diligently paying off your student loans, you may be eligible to deduct up to $2,500 of the interest paid on qualified student loans. The best part? You don’t need to itemize deductions to claim this benefit.
To qualify for the student loan interest deduction, the loan must have been taken out for you, your spouse, or your dependent. However, keep in mind that this deduction is subject to income limits. As your income increases, the amount you can deduct gradually phases out. This means that higher earners may not be able to take full advantage of this deduction.
If you’re unsure whether you qualify, ezTaxReturn can help! We’ll guide you through the process and ensure you get the deductions you deserve.
6. Jury Duty Pay
Did you know that if you’re paid for jury duty, you might still be able to claim a deduction? While the payment you receive for serving on a jury is taxable income, you can potentially deduct the amount if your employer continues to pay your salary during your absence.
Here’s how it works:
- If you receive a salary while serving on jury duty, and then you turn over the jury duty payment to your employer, you may be able to deduct the amount you paid over.
- The deduction will only apply to the amount that your employer didn’t already compensate you for, so it’s important to keep detailed records of both the jury duty payment and any wages your employer provided during your service.
If you’ve received jury duty pay and had to return it to your employer, be sure to track those amounts when filing your taxes!
7. Retirement Contributions
Contributing to retirement accounts can lower your taxable income, but it’s easy to overlook these potential deductions. Whether you’re contributing to an IRA, a 401(k), or another type of retirement plan, the IRS rewards saving for the future.
- Traditional IRA: Contributions may be deductible up to $7,000 (or $8,000 if you’re 50 or older). This lowers your taxable income for the year.
- Employer-sponsored retirement plans: Contributions to a 401(k) or SEP IRA can reduce your taxable income. In some cases, if you’re over 50, you can make catch-up contributions, further increasing your deduction.
8. Child and Dependent Care Credit
If you pay for childcare so that you can work, the Child and Dependent Care Credit can help offset some of those costs. The credit allows you to deduct a portion of daycare expenses for children under 13 or for dependents who are physically or mentally incapable of caring for themselves.
Eligible expenses include daycare, summer camps, and after-school programs. Be sure to keep receipts and documentation of the care provider’s details.
9. Business Expenses for the Self-Employed
For freelancers and small business owners, there are many business expenses that can be deducted. Here are some commonly missed deductions:
- Office supplies, computers, and software used for business purposes
- Business-related travel, meals, and entertainment
- Depreciation of business assets like vehicles or equipment
- Self-employed health insurance premiums
If you work from home, don’t forget to claim a portion of your home’s expenses for the business use of your space.
10. Moving Expenses (for Job-Related Moves)
Although moving expenses are generally no longer deductible for most taxpayers, there is an exception for active-duty members of the Armed Forces. For those who qualify, the IRS allows you to deduct moving expenses related to a job change. To claim this deduction, the move must be due to a military order and involve a permanent change of station. Eligible expenses include the cost of moving household goods and personal effects, as well as travel expenses for you and your family.
11. Mortgage Interest Deduction
Homeownership comes with its perks, and one of the most significant is the mortgage interest deduction. This popular tax deduction allows you to deduct the interest paid on your mortgage from your taxable income, potentially leading to substantial tax savings.
To claim the mortgage interest deduction, you need to itemize your deductions on your tax return. This means listing out all your eligible expenses, such as mortgage interest, state and local taxes, and charitable donations. The deduction applies to interest paid on a primary residence and/or a second home, but there are limits. For instance, the total amount of mortgage interest and property taxes that can be deducted is capped at $10,000 per year.
Don’t miss out on the deductions you’re entitled to! ezTaxReturn makes it easy to file and save.
12. Health Savings Account Contributions Deduction
If you have a high-deductible health plan, contributing to a Health Savings Account (HSA) can offer more than just a way to save for medical expenses—it can also provide a valuable tax deduction. HSA contributions are an above-the-line deduction, meaning you can claim it even if you don’t itemize deductions.
To qualify for this deduction, you must have a high-deductible health plan and not be enrolled in any other health coverage. The amount you can deduct is limited to the contributions made to your HSA, and these funds can be used to pay for qualified medical expenses.
By contributing to an HSA, you not only reduce your taxable income but also create a financial cushion for future healthcare costs. It’s a win-win situation that can lead to significant tax savings.
13. Gambling Loss Deduction
If you enjoy gambling, you might be able to offset some of your losses with the gambling loss deduction. This itemized deduction allows you to deduct losses incurred from gambling activities, but there are a few important rules to keep in mind.
First, you must itemize your deductions to claim this tax break. Additionally, you need to have documentation of your losses, such as receipts or records of the losses. The deduction is limited to the amount of your gambling winnings, which means you can’t deduct more than you’ve won.
It’s also essential to report any gambling winnings as taxable income on your tax return. To claim the gambling loss deduction, you’ll need to complete Form 1040 and Schedule A. Keeping detailed records of your gambling activities can help ensure you maximize this deduction and reduce your taxable income. Let ezTaxReturn handle the forms and math for you! Get your maximum refund with ease, start filing today.
14. Earned Income Tax Credit (EITC)
The Earned Income Tax Credit (EITC) is a valuable refundable tax credit aimed at assisting low- to moderate-income working individuals and families. This credit can significantly reduce your tax liability and even result in a refund if the amount of the credit exceeds your tax bill.
Eligibility for the EITC depends on your income, filing status, and the number of qualifying children you have. Even if you don’t have children, you may still qualify for a smaller credit. To claim the EITC, you must file a tax return and meet specific income thresholds.
The EITC is often overlooked, so it’s crucial to check if you qualify. By claiming this credit, you can reduce your taxable income and potentially increase your tax refund, making it an essential consideration for eligible taxpayers.
15. Education Credits
Education can be a significant expense, but fortunately, there are valuable tax credits available to help offset these costs. Two of the most beneficial education credits are the American Opportunity Credit and the Lifetime Learning Credit.
- American Opportunity Credit: This credit is available for the first four years of higher education and can be worth up to $2,500 per eligible student. It covers tuition, fees, and course materials. To qualify, the student must be enrolled at least half-time in a program leading to a degree or other recognized educational credential.
- Lifetime Learning Credit: Unlike the American Opportunity Credit, the Lifetime Learning Credit is not limited to the first four years of education and can be claimed for an unlimited number of years. It offers up to $2,000 per tax return for tuition and fees for undergraduate, graduate, and professional degree courses. This credit is particularly beneficial for those looking to improve job skills or pursue continuing education.
Both credits have income limits, so it’s essential to check your adjusted gross income (AGI) to determine eligibility. These education credits can significantly reduce your tax bill and make education more affordable.
Conclusion
By understanding and claiming these commonly missed tax deductions and credits, you can significantly lower your tax bill or increase your refund. Be sure to review the deductions listed here and consider how they apply to your financial situation. Keeping detailed records and using ezTaxReturn can help ensure you don’t leave money on the table when filing your taxes this year.
The articles and content published on this blog are provided for informational purposes only. The information presented is not intended to be, and should not be taken as, legal, financial, or professional advice. Readers are advised to seek appropriate professional guidance and conduct their own due diligence before making any decisions based on the information provided.
