10 Most Common Tax Deductions Individuals May Be Missing in 2025
When it comes to tax season, many individuals leave money on the table by overlooking key deductions. While tax laws evolve, the core principles of maximizing deductions remain constant: you need to know what’s available and ensure you meet the requirements to claim them. Below are ten common tax deductions individuals may be missing in 2025 and how to take advantage of them. Along the way, we’ll explore tips, real-world scenarios, and practical advice to help you save more.
1. State and Local Taxes (SALT) Deduction
The SALT deduction allows taxpayers to deduct state and local income, sales, and property taxes. However, the Tax Cuts and Jobs Act (TCJA) imposed a $10,000 cap on this deduction, which remains in effect for 2025. Despite the cap, many taxpayers forget to include all eligible state and local taxes paid, such as personal property taxes on vehicles or boat registration fees.
Example: John, a homeowner, pays $8,000 in property taxes and $2,500 in car registration fees. While his total exceeds the $10,000 cap, failing to include the car registration fees would leave money unclaimed.
Tip: Retain all records of property tax payments and receipts from significant purchases, which may be eligible under the sales tax option.
2. Medical and Dental Expenses
Out-of-pocket medical expenses can be deducted if they exceed 7.5% of your adjusted gross income (AGI). These expenses may include:
- Prescription medications
- Health insurance premiums (if not paid pre-tax through an employer)
- Long-term care costs
- Travel expenses for medical care
Many people miss this deduction because they don’t realize how quickly smaller expenses—like co-pays, glasses, or dental work—can add up.
Real-World Scenario: Sarah’s family had unexpected medical expenses totaling $12,000 in 2025. With an AGI of $100,000, her threshold for deducting medical expenses is $7,500. She can deduct $4,500 ($12,000 - $7,500).
Tip: Keep detailed records of medical payments, including mileage logs for trips to doctors and pharmacies. Consider using an expense-tracking app.
3. Charitable Contributions
Donations to qualified charities, whether in cash or non-cash items, can be deducted if you itemize. Many taxpayers forget to include non-cash contributions such as clothing, furniture, or goods donated to thrift stores.
Expanded Opportunity: The CARES Act temporarily allowed deductions for cash donations up to 100% of AGI, but for 2025, the limit reverts to 60% of AGI. Non-cash contributions, such as donating an old car or electronics, also count.
Tip: Obtain a receipt for every charitable donation and use fair market value estimations for non-cash contributions. Larger donations may require additional forms or appraisals. Online tools like ItsDeductible can help.
4. Home Office Deduction
With the rise of remote work, more individuals are eligible for the home office deduction. This applies to self-employed individuals who use part of their home exclusively for business. The deduction covers expenses like:
- Rent or mortgage interest
- Utilities
- Internet and phone services
Misconception Alert: W-2 employees working remotely cannot claim this deduction unless they’re classified as independent contractors.
Example: Mike, a freelance graphic designer, uses a 200-square-foot room in his 2,000-square-foot house as an office. Using the simplified method, he claims a $1,000 deduction ($5 x 200 square feet).
Tip: Use the simplified method (a flat $5 per square foot) or the actual expense method, whichever provides the greater benefit. Be prepared to provide clear documentation of exclusive use.
5. Student Loan Interest Deduction
You can deduct up to $2,500 of interest paid on student loans, even if you don’t itemize. However, there are income limits that phase out this deduction. For 2025, single filers earning over $90,000 or joint filers earning over $180,000 may not qualify.
Tip: Look for Form 1098-E from your loan servicer, which details the amount of interest paid during the year. Don’t forget to check for employer-paid student loan benefits that may also reduce your taxable income.
6. Retirement Contributions
Contributions to traditional IRAs, 401(k)s, or similar retirement plans can be deducted, reducing taxable income. The maximum contribution limits for 2025 are $7,000 for IRAs (or $7,500 if you’re 50 or older).
Future-Proofing: Contributions to retirement accounts made up until the tax filing deadline (April 15, 2026) can count for the 2025 tax year. Roth IRA contributions are not deductible, but they offer tax-free growth and withdrawals.
Tip: Even if you contribute the maximum to an employer plan, consider a backdoor Roth IRA if your income limits traditional contributions.
7. Educator Expenses
Teachers and eligible educators can deduct up to $300 of out-of-pocket expenses for classroom supplies. This deduction can be claimed without itemizing. For married couples who are both educators, the deduction doubles to $600.
Example: Mrs. Johnson, a high school art teacher, spends $350 on paint, brushes, and canvases for her students. She claims $300 of these expenses as a deduction.
Tip: Keep receipts for all classroom-related purchases. If you’re unsure whether an expense qualifies, consult IRS guidance.
8. Energy-Efficient Home Improvements
The Inflation Reduction Act extended and expanded credits and deductions for energy-efficient home upgrades. Deductions may apply to:
- Energy-efficient windows, doors, and insulation
- Solar panels and batteries
- Heat pumps and high-efficiency HVAC systems
Case Study: After installing solar panels, the Johnson family received a tax credit worth 30% of the installation cost. Their $20,000 investment resulted in a $6,000 credit.
Tip: Ensure contractors provide documentation of qualifying improvements, as these are necessary to claim the credit. Consult energy.gov for a list of eligible upgrades.
9. Job Search Expenses
Although the deduction for job search expenses was eliminated for most taxpayers under the TCJA, self-employed individuals can still deduct costs associated with seeking new contracts or clients. These may include:
- Resume preparation
- Travel expenses
- Job placement agency fees
Tip: Carefully track these expenses, as they can quickly add up if you’re actively searching for work opportunities. Consider negotiating contracts that may help offset some of these costs.
10. Hobby Losses
If you earn income from a hobby but your expenses exceed your income, you may qualify for deductions related to hobby costs. However, the IRS requires that your hobby be conducted in a way that demonstrates an intent to make a profit.
Key Point: The IRS scrutinizes hobby deductions closely. If you’ve turned your passion into a side business, consider structuring it formally to avoid audit issues.
Tip: Maintain detailed records of income and expenses to justify the deduction and ensure compliance with IRS rules.
How to Maximize Deductions
To make the most of these deductions:
- Stay Organized: Use digital tools or apps to track expenses and save receipts.
- Consult a Tax Professional: Complex tax situations may require expert advice to ensure you’re claiming all eligible deductions.
- Itemize When It Makes Sense: Compare your total itemized deductions to the standard deduction ($13,850 for single filers, $27,700 for married filing jointly in 2025).
- Leverage Timing: Prepay deductible expenses like property taxes or medical bills in years when your itemized deductions will exceed the standard deduction.
Conclusion
Maximizing your tax deductions requires awareness and meticulous record-keeping. By knowing what to look for and consulting professionals when needed, you can reduce your tax liability and keep more of your hard-earned money in 2025. Whether you’re a homeowner, teacher, freelancer, or retiree, these common deductions offer significant opportunities to save. Don’t let these valuable tax breaks go unclaimed—every dollar counts!