Tax season arrives every year. And every year, millions of Americans overpay the government simply because they overlook valuable tax deductions they are legally entitled to claim. Leaving this money on the table is like giving away a portion of your salary for free.
Most people know about the big deductions, like mortgage interest. But the real savings are often found in the smaller, less-obvious write-offs that many taxpayers either don’t know about or assume they don’t qualify for.
This guide will shine a light on the most commonly missed tax deductions. Understanding these opportunities can significantly boost your refund or lower your tax bill. Let’s make sure you keep more of your hard-earned money this year.
Disclaimer: This article provides general information and is not a substitute for professional tax advice. Tax laws are complex and change frequently. Please consult a qualified tax professional for advice specific to your situation.
Understanding the Standard vs. Itemized Deduction
Before we dive in, it is crucial to understand this choice. You can either take the standard deduction—a fixed dollar amount determined by your filing status—or you can itemize deductions. You should choose whichever method results in a larger deduction. With recent increases in the standard deduction, fewer people itemize, but for many, it is still the far better financial move. Many of the following deductions require you to itemize.
1. State and Local Tax (SALT) Deduction
Even if you don’t own a home, you likely pay state and local taxes. Many people forget that they can deduct these payments on their federal return.
This includes state and local income taxes or, alternatively, state and local sales taxes. You cannot deduct both. For most people in states with an income tax, deducting income tax provides a larger benefit. If you live in a state with no income tax, deducting sales tax is a great option. The IRS even provides tables to estimate your sales tax deduction, so you don’t have to save every receipt.
Keep in mind there is a $10,000 per household cap on the SALT deduction.
2. Charitable Contributions (Beyond Cash)
Most people remember to deduct the cash they donate to their favorite charity. However, they often forget about non-cash contributions and related expenses.
What you might be missing:
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Goods: The fair market value of clothes, furniture, and other items you donate to organizations like Goodwill or Salvation Army. Always get a receipt.
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Mileage: You can deduct miles you drive your car for charitable work. The rate for 2024 is 14 cents per mile. It may not sound like much, but it adds up if you volunteer regularly.
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Out-of-Pocket Costs: The cost of ingredients you buy to bake for a fundraiser or supplies you purchase for a charity event can also be deducted.
3. Student Loan Interest Deduction
This one is a big deal, and it is an “above-the-line” deduction, meaning you do not have to itemize to claim it. If you paid interest on a qualified student loan during the year, you can deduct the amount you paid, up to $2,500. Your lender will send you Form 1098-E, which shows how much interest you paid. Many people, especially recent graduates, overlook this powerful deduction.
4. Self-Employment and Home Office Expenses
In the age of the gig economy and remote work, this category is a goldmine of missed deductions. If you are a freelancer, contractor, or have a side hustle, you are running a business, and you can deduct your business expenses.
Commonly missed self-employment deductions:
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Home Office Deduction: If you use a part of your home exclusively and regularly for your business, you can deduct a portion of your rent or mortgage, utilities, and insurance. The simplified method makes this easier than ever.
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Mileage: The miles you drive for business (e.g., to meet clients, pick up supplies) are deductible at a significant rate (67 cents per mile for 2024).
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Subscriptions and Fees: The cost of industry publications, professional association dues, and software like Adobe Creative Cloud or Microsoft 365.
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Health Insurance Premiums: Self-employed individuals can often deduct 100% of their health and dental insurance premiums.
For a deeper dive into this topic, explore [Our Complete Guide to Taxes for the Self-Employed](your-internal-link-here).
5. Medical Expense Deduction
This deduction can be tricky because you can only deduct medical expenses that exceed 7.5% of your Adjusted Gross Income (AGI). This high threshold causes many to ignore it. However, if you or a family member had a year with significant medical costs, it is absolutely worth calculating.
Deductible expenses you might not think of:
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Mileage to and from medical appointments.
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The cost of prescription eyeglasses, contact lenses, and hearing aids.
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Payments for smoking-cessation programs and prescription drugs for nicotine withdrawal.
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The cost of modifications to your home for medical care, such as adding ramps or grab bars.
6. Gambling Losses
This is a surprising one for many. If you enjoy the occasional trip to the casino or play the lottery, you must report all your winnings as income. The good news is that you can also deduct your gambling losses, but only up to the amount of your winnings. You cannot deduct a net loss. You must have records to prove your losses, such as tickets, receipts, and statements.
Conclusion: Be Your Own Best Advocate
The U.S. tax code is complicated, but you do not need to be a CPA to save money. By being organized, keeping good records, and knowing where to look, you can uncover deductions that will significantly reduce your tax burden.
Do not assume the standard deduction is your best option. Take the time to review these commonly missed opportunities. The 30 minutes you spend could put hundreds or even thousands of dollars back into your pocket. For the most definitive information, always refer to the official IRS website, which has detailed publications on every type of deduction.
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