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Every filing season, some taxpayers leave savings on the table by missing out on tax breaks. Don’t be one of them. Here are 10 tax deductions and credits that many people often overlook.
Tax Day is now less than a month away. That means millions of us are finally focusing on our 2025 tax returns.
Every taxpayer’s goal, regardless of when they file, is to pay Uncle Sam as little as legally required. Even the Internal Revenue Service says that’s what we should do. It is number 3 on the 10 items in the agency’s Taxpayer Bill of Rights.
But every filing season, too many taxpayers cheat themselves by overlooking some valuable tax breaks.
Myriad deductions and credits: The tax-saving possibilities include deductions, which lower your taxable income. Generally, the less of your money that’s subject to Uncle Sam’s clutches, the lower your final tax bill.
A $5,000 tax deduction, for example, will reduce your $50,000 total income to a taxable amount of $45,000. On 2025 returns, that will drop a single taxpayer from the 22 percent tax bracket to the 12 percent bracket.
Some deductions require you to itemize. Others are available regardless of whether you file a Schedule A or claim the standard deduction.
Then there are tax credits. Credits are better than deductions, since a tax credit amount will offset any tax you owe a dollar-for-dollar.
Take the five grand used in the tax deduction example. If that $5,000 is instead a tax credit and you owe the $5,000 in taxes, the credit will zero out your tax bill. Some credits could even get you a refund if they are more than you owe.
The combination of deductions and credits can make a big difference to your tax bottom line. Here are 10 tax breaks you definitely should investigate before sending your 1040 to the Internal Revenue Service.
1. Earned income tax credit (EITC): The Earned Income Tax Credit, or EITC, was created to help reduce the amount of tax that lower- and moderate-income wage earners owe. But every year, says the IRS, around 20 percent of EITC-eligible taxpayers miss out on the credit.
That’s too bad, since the EITC could provide substantial tax savings. The EITC amount is based on your income and the size of your family. On 2025 returns, the credit ranges from $649 for single taxpayers with no children to $8,046 for taxpayers with three or more qualifying children.
Even better, the EITC is a refundable tax credit. If you qualify for an amount that is more than your tax liability, you get the excess EITC amount as a refund.
2. Dependent care costs: Ask any working parent about the cost of raising a family and they’ll tell your that one of the biggest expenses is childcare. The tax code can help a bit.
The Child and Dependent Care Tax Credit could provide a credit of up to $1,050 for the expenses to care for one child, or up to $2,100 in costs to care for two or more youngsters.
Yes, I know that’s less than parents pay for care of their kiddos, but every bit that cuts your tax bill helps. You can make sure you get the maximum possible credit by adding last summer’s day camp costs — and it’s day camps only, not sleep-away programs — to your child care costs tally if your camp-attending kids are younger than 13.
Also note the tax break’s full name. If you have other, older tax dependents who need looking after so you can work, use the Child and Dependent Care Tax Credit to pay for those costs, too.
3. Credit for other dependents: Those dependents who aren’t your children (as far as the tax code is concerned) also might help you qualify for another tax credit. The Credit for Other Dependents is worth $500 to taxpayers who are providing support for older youngsters, aging parents, or other relatives who are part of their household.
4. Lifetime learning tax lessons: Many students are well beyond the traditional young adult college age. These individuals are taking classes, for example, to enhance their job skills and improve their chances for promotions and pay raises.
The Internal Revenue Code recognizes this effort via the Lifetime Learning Credit. It’s calculated as 20 percent of the first $10,000 in qualifying expenses paid per year, up to a maximum credit of $2,000.
5. Student loan interest deduction: With the shake-up of student loan relief under the second Trump administration, many who borrowed money to pay for college are looking for other government help.
One option is the tax break on a portion of the interest paid on college debt. You can deduct up to $2,500 (or the actual amount, whichever is less) of the interest paid on qualified student loans.
You don’t have to itemize to claim this deduction. It is one of the two dozen adjustments to income popularly known as above-the-line deductions. Claim it on Form 1040 Schedule 1 (specifically line 21) for interest paid on a qualified student loan for yourself, a spouse, or a dependent.
6. Educator expenses: Teachers, instructors, counselors, principals, and aides who worked in an elementary or secondary school (kindergarten through 12th grade) for at least 900 hours during the school year can deduct up to $300 of work-related expenses paid during the tax year.
The expenses that count for the deduction, which is another above-the-line claim, include costs of professional development courses related to the curriculum or students you teach, and books, supplies, equipment, and other materials used in the classroom.
This deduction is available to educators working in public, private, and religious schools. However, it doesn’t apply to expenses for home schooling.
7. Retirement account contributions: Saving for your post-work years always is a wise move. It also might help trim your current tax bill.
If you didn’t max out your IRA contributions las year, you have until April 15 to do so. The maximum for the 2025 tax year, for both traditional and Roth IRAs, is $7,000. And if the IRA you top-off by Tax Day is a traditional one, you might be able to deduct all or some of those retirement contributions on this year’s return.
8. Retirement savings credit: Retirement savers who did put some money into an IRA, traditional or Roth version (or do so soon), as well as those who contributed to a workplace or self-employment retirement plan, also might be able to get a bonus tax break.
The Saver’s Credit, which as noted earlier reduces your actual tax liability, is available to lower- and middle-income earners who contribute to retirement savings. It’s worth up to $1,000 to qualifying taxpayers who put $2,000 into eligible plans.
9. HSA contributions: The contribution time shifting option available for IRAs also applies to a specific tax-favored health care account. You have until April 15 to max out the money you put into a health savings account (HSA) for the prior tax year.
An HSA is a companion feature of a high-deductible health plan (HDHP). The money you put into an HSA is primarily to help you cover your HDHP’s large deductible amount. For the 2025 tax year, you can contribute up to $4,300 if you are a single taxpayer covered by a HDHP. The maximum HSA amount for a filer with HDHP family coverage is $8,550. At age 55, individuals can contribute an additional $1,000.
But an HSA also has several other tax advantages (discussed in HSAs, the champion when it comes to tax break multitasking), including as an above-the-line deduction on your taxes. Again, you claim the allowable amount on Form 1040 Schedule 1.
10. Medical transportation costs: Sticking with the medical theme, if you itemize, make sure you don’t overlook tax-deductible health care costs. You need to have enough expenses to clear the 7.5 percent of your adjusted gross income threshold before you can claim them.
Taxpayers often forget about medical-related travel costs. These amounts could be enough to make your medical in claims in the first section of Schedule A worthwhile.
Generally, you can deduct the cost of traveling to healthcare provider appointments, as well as trips to pick up prescription medications. In addition to your own vehicle’s mileage, allowable medical transportation expenses include fuel, parking fees, public transit (bus and train fare), and ambulance service fees.
You can read more about medical travel deductions in my post Make the most of tax-deductible medical miles. And for an overall look at itemizing health care costs, check out my post These tax-deductible medical expenses could make itemizing worthwhile.
