Millions of taxpayers overlook deductions that could reduce their tax bills or increase their refunds. With recent changes in tax laws and IRS updates, knowing what you can legally claim is more important than ever.
Earned Income Tax Credit (EITC)
An estimated 25% of eligible taxpayers fail to claim the EITC. For 2025, the range is from $632 to $8,046, depending on income and household size. Life changes, such as job loss or reduced hours, may make you eligible even if you were not before. Filing is required even if you owe no taxes.
Reinvested Dividends
Dividends that are automatically reinvested increase your cost basis in mutual funds and stocks. This reduces your taxable capital gain when you sell. Many investors overlook tracking these reinvestments and end up overpaying taxes. Keeping records helps reduce your tax liability over time.
Student Loan Interest Paid by Others
Up to $2,500 in student loan interest is deductible, even if someone else paid it. If parents or relatives make payments, the IRS treats them as gifts, and the student borrower can claim the deduction, so long as they are not listed as a dependent on another return.
Child and Dependent Care Credit
Families using dependent care FSAs at work can still claim the Child and Dependent Care Credit for expenses above the FSA limit. The credit applies to up to $6,000 in qualified expenses for two or more children, with at least $1,000 potentially qualifying beyond the $5,000 FSA cap.
State Sales Tax Deduction
Taxpayers can choose to deduct state income tax or state sales tax. This is especially valuable in states with no income tax, like Florida, Nevada, Texas, or Washington. The IRS provides tables estimating allowable sales tax deductions by income and ZIP code.
You can also add sales tax on major purchases like cars or boats. For 2025, the State and Local Tax (SALT) deduction cap has increased to $40,000, a significant rise from the previous $10,000 limit.
Investment-Related Expenses (For Business Filers)
While investment advisor fees are no longer deductible for individual filers, business-related investment expenses still qualify. For example, tax prep fees for business-related schedules or safe deposit box fees for storing investment records may be deductible for self-employed filers.
Home Office Deduction
Self-employed individuals using part of their home exclusively for business may deduct a portion of home-related expenses like utilities, mortgage interest, and repairs. This simplified method offers a deduction of $5 per square foot, up to 300 square feet. The space must be used regularly and exclusively for work.
Medical Travel and Lodging
Travel to medical appointments can be deducted at 21 cents per mile in 2025, along with parking fees and tolls. Overnight lodging related to care is deductible up to $50 per night. These expenses only count if your total medical costs exceed 7.5% of your adjusted gross income (AGI).
Vehicle Registration Property Tax
Some states charge value-based property taxes as part of vehicle registration fees. These value-based amounts are deductible if you itemize. Fees based solely on the weight or age of the vehicle are not deductible. You need to check your DMV paperwork to determine the deductible portion.
Military Moving Expenses
Active-duty service members relocating under a permanent change of station can still deduct reimbursed moving expenses. These include transportation, lodging, vehicle shipping, and even pet relocation. Any reimbursements received reduce the eligible deduction amount.
Jury Duty Pay Turned Over to Employer
If your employer pays your salary while you serve jury duty, but requires you to hand over the jury duty pay, that amount is deductible. The income still shows up on your return, but you can deduct it to avoid being taxed on funds you did not keep.
Refinanced Mortgage Points
When you refinance your mortgage, the points paid must be deducted gradually over the life of the loan. For a 25-year loan, that’s 1/25th per year. If the loan is paid off early due to home sale or further refinance, the remaining undeducted points can be claimed in full that year.
Prior Year State Tax Payments
If you paid state income tax in 2025 for a previous tax year, that payment qualifies as a deduction in 2025. Quarterly estimated payments also count toward the total. These often get overlooked but still fall under the $40,000 SALT cap.
Long-Term Care Insurance Premiums
Premiums for long-term care insurance qualify as medical expenses, subject to age-based limits. For instance, in 2025, taxpayers aged 70 or older can deduct up to $6,020. Employer-paid portions reduce the deductible amount. These expenses also count toward the 7.5% AGI threshold.
Small Charitable Expenses
Minor out-of-pocket expenses for volunteer work, such as ingredients for meals, school supplies, or postage, are deductible. Charitable driving can also be claimed at 14 cents per mile. Though small individually, these costs can accumulate into meaningful deductions when tracked throughout the year.
