Top 10 Tax Deductions You Might Be Missing

Every year, millions of American taxpayers leave money on the table by missing legitimate tax deductions. According to IRS data, the average filer overlooks more than $600 in eligible deductions annually, resulting in billions of dollars in overpaid taxes across the country.

Key Takeaways

• The average taxpayer misses over $600 in eligible tax deductions each year due to lack of awareness

• State sales tax deductions can save residents of no-income-tax states up to $2,400 annually

• Student loan interest deduction allows up to $2,500 reduction in taxable income without itemizing

• Charitable mileage at 14 cents per mile and out-of-pocket volunteer expenses are often overlooked

• Above-the-line deductions like HSA contributions and retirement savings reduce adjusted gross income regardless of itemizing

The key to maximizing your tax savings lies in understanding two types of deductions: above-the-line deductions that reduce your adjusted gross income regardless of whether you itemize, and itemized deductions that must exceed the standard deduction to provide benefits. For 2024, the standard deduction is $14,600 for single filers and $29,200 for married filing jointly.

These commonly missed tax deductions represent legitimate opportunities to reduce your tax liability and increase your tax refund. Whether you’re a seasoned tax filer or preparing your first return, understanding these overlooked tax deductions can significantly impact your tax bill. Let’s explore the top 10 tax deductions you might be missing and how to claim them properly.

State Sales Tax Deduction

Residents of Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming, where there is no state income tax, can claim the state sales tax deduction. This often-overlooked deduction can save taxpayers up to $2,400 annually when combined with local sales taxes.

You can calculate this deduction using IRS sales tax tables based on income and location or by tracking actual sales tax paid. Major purchases like vehicles, boats, aircraft, homes, and home improvements can increase your deductible amount.

Keep in mind, the total deduction for state and local taxes is capped at $10,000 through 2025. This cap affects high-tax states more, making the sales tax deduction especially valuable in no-income-tax states.

Use the IRS Sales Tax Calculator to determine your optimal deduction based on income, filing status, and local tax rates.

Student Loan Interest Deduction

The student loan interest deduction is a valuable above-the-line deduction that lets you reduce your taxable income by up to $2,500 for interest paid on qualified student loans in 2024.

You don’t need to itemize to claim this deduction, as it reduces your adjusted gross income directly. Parents or others who pay the interest are treated as gifting the money to the borrower, who can then claim the deduction.

Income limits apply: for 2024, the deduction phases out between $75,000 and $90,000 for single filers, and $155,000 to $185,000 for married filing jointly.

Form 1098-E is provided if you paid $600 or more in interest, but you can claim the deduction even if less, by tracking payments yourself.

Charitable Contributions and Out-of-Pocket Expenses

Besides cash donations, many miss deductions for volunteer expenses. You can deduct 14 cents per mile driven for charity work, as well as out-of-pocket costs like supplies, stamps, parking, tolls, and public transit fares.

You must itemize deductions and keep detailed records, including mileage logs, receipts, and charity acknowledgments for expenses over $250.

Health Savings Account (HSA) Contributions

HSA contributions reduce your adjusted gross income and offer triple tax benefits: tax-free growth and tax-free withdrawals for qualified medical expenses. For 2024, contribution limits are $4,150 (individual) and $8,300 (family), with a $1,000 catch-up for those 55+.

To qualify, you must have a High Deductible Health Plan (HDHP) with minimum deductibles of $1,600 (individual) and $3,200 (family). Contributions can be made until the tax filing deadline, April 15, 2025.

Home Office Deduction

Self-employed individuals and qualifying remote workers can claim the home office deduction for space used regularly and exclusively for business. There are two methods: the simplified method offers $5 per square foot up to 300 square feet (max $1,500), requiring minimal record-keeping; the actual expense method calculates the business-use percentage of home expenses like mortgage interest, property taxes, utilities, insurance, repairs, and depreciation, often yielding larger deductions.

The office space must be used solely for business, with regular use meaning routine business activities several times per week. This deduction is available to self-employed individuals filing Schedule C and can reduce both income and self-employment taxes.

Retirement Plan Contributions

Contributions to retirement plans like traditional IRAs and 401(k)s provide valuable tax deductions while building savings. For 2024, IRA deductions max at $7,000 ($8,000 if 50+), and 401(k) contributions can reach $23,000 ($30,500 with catch-up). IRA contributions reduce adjusted gross income regardless of itemizing, though income limits apply if covered by a workplace plan.

The Saver’s Credit offers additional refundable tax credits up to $1,000 ($2,000 married filing jointly) for eligible low-to-moderate income taxpayers. Maximize contributions by the tax filing deadline to reduce taxes and grow retirement funds.

Medical and Dental Expenses

Medical and dental expenses are deductible when they exceed 7.5% of adjusted gross income. Qualifying expenses include health insurance premiums (after-tax), dental work, vision care, hearing aids, medical equipment, pregnancy tests, breast pumps, and medically necessary weight loss programs.

Transportation costs for medical care—22 cents per mile, parking, tolls, public transit—are deductible. Home modifications for medical needs, like wheelchair ramps, qualify for deductions equal to costs not increasing home value. Long-term care insurance premiums and expenses also count. Tracking these expenses carefully can yield significant tax savings.

Gambling Loss Deduction

Gamblers can deduct gambling losses up to the amount of reported winnings, offsetting tax on gambling income. Accurate records—receipts, tickets, dates, amounts—are required. This applies to all gambling types, including lotteries and sports betting. You must itemize deductions to claim this.

Professional gamblers may deduct losses as business expenses if IRS criteria are met.

Jury Duty Pay Turned Over to Employer

If your employer pays your salary during jury duty and requires you to hand over jury pay, report the jury pay as income and claim an equal above-the-line deduction on Schedule 1 of Form 1040. This prevents double taxation and reduces adjusted gross income. Keep documentation of payments and employer requirements.

Mortgage Points on Refinancing

Points paid on mortgage refinancing are deductible over the loan’s life, typically 1/30th per year for a 30-year mortgage. If you pay off the loan early, you can deduct remaining points in that year. Form 1098 shows points paid, but deduction rules vary by purpose—purchase, refinance, or home improvement. Properly deducting refinancing points ensures valuable tax benefits.

How to Claim These Deductions

To maximize these overlooked tax deductions, compare your total itemized deductions to the standard deduction for your filing status—$14,600 for single filers and $29,200 for married filing jointly in 2024. Itemize if your deductions exceed these amounts; otherwise, the standard deduction applies.

Remember, some valuable deductions like student loan interest and HSA contributions are above-the-line and available regardless of itemizing. Use tax software to determine the best option.

Keep organized records year-round, including receipts and mileage logs, to simplify claiming deductions. Consider timing expenses, like bunching charitable contributions or medical costs, to exceed itemizing thresholds and boost tax savings.

Frequently Asked Questions

Can I claim tax deductions without receipts?

Most deductions require documentation, but receipts aren’t always necessary. Credit card statements, bank records, canceled checks, and mileage logs can often suffice. Larger deductions usually need formal proof. Keep records to support claims in case of audits.

What’s the difference between a tax deduction and tax credit?

Tax deductions lower taxable income, reducing taxes owed by a percentage. Tax credits reduce taxes dollar-for-dollar and are generally more valuable. For example, a $1,000 deduction saves $220-$370, while a $1,000 credit saves $1,000.

Should I itemize deductions or take the standard deduction?

Itemize if your deductions exceed the standard deduction ($14,600 single, $29,200 married filing jointly for 2024). Some deductions, like student loan interest, apply regardless of itemizing. Tax software can help choose the best option.

How far back can I amend my tax return to claim missed deductions?

You have three years from the filing deadline to amend returns using Form 1040-X. For 2024 taxes, the deadline is April 2028. Some credits, like the earned income tax credit, can be claimed for up to three prior years.

Are there income limits for claiming these deductions?

Income limits vary. The student loan interest deduction phases out at higher incomes, while medical and charitable deductions usually don’t. Above-the-line deductions often have fewer limits, benefiting moderate to high earners.