Commonly Overlooked Tax Deductions That Can Lower Your 2025 Tax Bill
The U.S. tax code spans tens of thousands of pages, so it’s no surprise that many taxpayers miss out on valuable deductions every year. Overlooking these opportunities can mean leaving money on the table—money that could reduce your tax bill or increase your refund.
Here are some of the most commonly overlooked deductions, along with insights to help you maximize your tax savings. As your trusted tax advisor and provider of year‑round tax planning and financial guidance, we’re here to ensure you take advantage of every tax break available.
Deduct State Sales Tax as an Alternative
If you itemize deductions, you can choose to deduct state and local sales tax instead of state income tax. This is especially helpful for taxpayers in states without income tax—or for those who made large purchases throughout the year.
The impact is even greater now that the deduction cap has increased from $10,000 to over $40,000. If sales tax exceeds your state income tax, this deduction may significantly reduce your tax liability.
Mortgage Discount Points
When you buy a home, mortgage discount points—fees paid to lower your interest rate—are generally deductible. One point equals 1% of your loan amount. If you refinanced, these points must be deducted over the life of the loan.
But here’s what many people forget: when you sell your home, you can deduct any remaining, unamortized points immediately.
Student Loan Interest Deductions
You may be able to deduct up to $2,500 in student loan interest—even if someone else helped make the payments. Parents who co‑signed their child’s student loans are often eligible but overlook this deduction.
Avoid Alimony and Child Support Missteps
If your divorce was finalized before 2019, alimony is deductible for the payer and taxable to the recipient. For divorces finalized after 2018—or amended afterward—alimony is neither taxable nor deductible.
Child support is never deductible or taxable. Mixing up these rules can lead to costly filing errors.
Reinvested Dividends
Many investors reinvest dividends automatically, paying tax on them each year. When selling investments later, taxpayers frequently forget to adjust their basis to account for these reinvested amounts. Failing to do so means you may overpay capital gains tax.
Child and Dependent Care Credits
If you pay for daycare while working—or looking for work—the Child and Dependent Care Credit may offer significant savings. Some employers also offer dependent care benefits, which can be used in combination with the federal credit as long as you don’t double count expenses.
Self‑Employment Deductions
If you’re a sole proprietor or S corporation owner, you may be missing out on several powerful deductions, including:
- Half of your self‑employment tax
- Health insurance premiums (depending on W‑2 treatment)
- Contributions to retirement plans such as SEP IRAs
- The QBI deduction (Qualified Business Income), subject to income thresholds
- Special business incentives like accelerated depreciation and the research credit
Don’t Miss Out on Tax Savings
With so many rules and exceptions, it’s easy to overlook valuable tax deductions. But a little guidance can go a long way toward reducing your tax bill and keeping more money where it belongs—with you.
Cohn, Lopez & Associates is here to help you maximize deductions, avoid tax surprises, and navigate the complexities of the tax code with confidence.
If you think any of these ideas might apply to you—or you're unsure—reach out today for expert tax preparation and personalized tax planning support.