When tax season rolls around, everyone is looking for ways to reduce their tax bill. One of the most effective strategies for lowering taxable income is to take full advantage of deductions. However, many taxpayers miss out on key deductions simply because they aren’t aware of them or don’t think they qualify. To help ensure you're not leaving money on the table, here are some commonly overlooked tax deductions that could help reduce your tax liability.
Did you know that you can deduct certain medical expenses if they exceed a certain percentage of your adjusted gross income (AGI)? For the 2025 tax year, you can deduct qualified unreimbursed medical expenses that are more than 7.5% of your AGI. This includes things like doctor visits, prescription medications, dental treatments, and even travel costs related to medical care. If you have significant medical expenses, keeping track of all receipts and eligible expenses can result in considerable savings.
Most people know that donations to charity are deductible, but many don’t realize just how much they can deduct. Besides cash contributions, you can also deduct the value of non-cash donations like clothes, furniture, or household items given to qualified organizations. Even out-of-pocket expenses for volunteering, such as mileage or supplies, can be deducted. Just make sure to keep good records and receipts, as the IRS requires documentation for these deductions.
If you're self-employed or run a small business from home, you might qualify for the home office deduction. Many people shy away from claiming this deduction due to fears of an audit, but the IRS offers a simplified option that makes it easy to claim. You can deduct $5 per square foot of your home used exclusively for business, up to a maximum of 300 square feet. Alternatively, if your actual expenses (rent, utilities, and repairs) are greater, you can calculate and deduct the portion of those costs that apply to your home office.
If you're paying off student loans, you may be eligible to deduct up to $2,500 of the interest you paid during the year. This deduction is available even if you don’t itemize, which makes it especially valuable for young professionals just starting out. There are income limits, so be sure to check the IRS guidelines, but for many taxpayers, this can be an easy way to reduce taxable income.
The SALT deduction allows most taxpayers to deduct up to $40,000 in state and local taxes, including property taxes, state income taxes, and sales taxes. If you live in a state with high taxes, this can provide significant relief. You can choose to deduct either state income taxes or sales taxes, whichever is higher, but not both, so be sure to do the math and see which option benefits you most.
Contributing to a traditional IRA or traditional 401(k) can help you save for the future while potentially reducing your taxable income. For the 2025 tax year, you can contribute up to $7,000 to a traditional IRA, or $8,000 if you’re age 50 or older, though deductibility depends on your income and workplace retirement coverage. Employees can contribute up to $23,500 to a 401(k) in 2025, or $31,000 if age 50 or older. Traditional 401(k) contributions and deductible IRA contributions can lower your taxable income, helping you save on taxes while preparing for retirement.
If you’re a teacher, you probably spend some of your own money on classroom supplies. The good news is that you can deduct up to $300 of unreimbursed expenses (or $600 if both you and your spouse are educators). This can include things like books, classroom materials, and even professional development courses.
Maximizing your deductions is one of the best ways to lower your tax bill, but it requires careful planning and documentation. By being aware of commonly overlooked deductions, you can ensure you’re getting every tax break available to you. Remember, tax laws can be complex, and everyone’s financial situation is different, so it's always a good idea to consult with a tax professional to make sure you’re maximizing your deductions and minimizing your tax liability.