Tax Deductions Most People Miss:
Stop Overpaying the IRS

The IRS doesn't remind you about deductions you forgot to claim. Every year, millions of Americans overpay their taxes simply because they didn't know about — or forgot to track — legitimate deductions and credits they qualify for. This guide covers the most commonly missed tax benefits organized by who they apply to.

First: Deduction vs. Credit — Why It Matters

A deduction reduces your taxable income. If you're in the 22% bracket and claim a $1,000 deduction, you save $220 in taxes. A credit reduces your actual tax bill dollar-for-dollar. A $1,000 credit saves you exactly $1,000. Credits are worth significantly more than deductions of the same amount.

Commonly Missed Deductions for Everyone

State and Local Sales Tax (SALT Deduction)

If you itemize deductions, you can choose between deducting state income tax OR state sales tax — whichever is higher. For residents of states with no income tax (Texas, Florida, Nevada, Washington, Wyoming, Alaska, South Dakota, New Hampshire, Tennessee), the sales tax deduction is the only option and is frequently missed. Even in income-tax states, if you made a major purchase (car, boat, appliances), sales tax may exceed your income tax.

Charitable Contributions Beyond Cash

Most people track cash donations but miss:

• Donated goods — Clothing, furniture, and household items donated to Goodwill, Salvation Army, or other qualified organizations are deductible at fair market value. Keep a receipt and itemized list.
• Mileage driven for volunteer work — 14 cents per mile for charitable driving (trips to volunteer sites, delivering donated goods).
• Out-of-pocket expenses for volunteering — Supplies you purchased for a nonprofit, uniforms, parking while volunteering.

Student Loan Interest Deduction

You can deduct up to $2,500 in student loan interest paid — and this is an "above the line" deduction, meaning you get it even if you take the standard deduction. Your lender sends Form 1098-E, but many filers overlook it or don't realize the interest portion of their payments is deductible.

Medical and Dental Expenses

If you itemize, medical expenses exceeding 7.5% of your adjusted gross income (AGI) are deductible. Most people don't track these because they assume they won't cross the threshold. But in years with major medical events (surgery, dental work, vision correction, mental health treatment), the total often qualifies. Commonly missed medical expenses:

• Health insurance premiums (if not paid pre-tax through employer)
• Long-term care insurance premiums (age-based limits)
• Prescription medications
• Mileage to medical appointments (22 cents/mile in 2026)
• Home modifications for medical reasons (wheelchair ramps, grab bars)
• Mental health services and therapy co-pays

For Homeowners

Home Office Deduction (Self-Employed Only)

If you're self-employed and use part of your home exclusively and regularly for business, you can deduct expenses proportional to the space. The simplified method allows $5 per square foot (up to 300 sq ft = $1,500 max). The regular method is more complex but often yields a larger deduction.

Mortgage Points

Points paid to lower your mortgage interest rate at closing are deductible — usually in the year they're paid for a home purchase, or amortized over the loan term for refinances. Check your closing statement (HUD-1 or Closing Disclosure) for "discount points."

Property Tax

Deductible up to $10,000 combined with state and local income/sales tax (SALT cap). Many homeowners already claim this, but those who recently purchased may not know about supplemental property tax bills that arrive separately.

Energy Efficiency Credits

The Inflation Reduction Act provides substantial tax credits for energy-efficient home improvements:

• Solar panels: 30% of cost (no cap)
• Heat pumps, biomass stoves: Up to $2,000/year
• Insulation, windows, doors: Up to $1,200/year
• EV charger installation: 30% of cost, up to $1,000

For Parents and Families

Child and Dependent Care Credit

If you pay for daycare, after-school care, or summer day camp so you can work, you may qualify for a credit of 20–35% of up to $3,000 in expenses for one child ($6,000 for two+). Many parents know about this but don't realize summer day camp qualifies.

Earned Income Tax Credit (EITC)

The EITC is one of the largest credits available and is frequently unclaimed — the IRS estimates 20% of eligible filers don't claim it. It's refundable (you get money back even if you owe no tax). For 2026, maximum EITC with three children exceeds $7,000. Income limits apply but extend into middle-income ranges for families with children.

Education Credits

• American Opportunity Tax Credit — Up to $2,500/year per student for the first 4 years of college. 40% is refundable.
• Lifetime Learning Credit — Up to $2,000/year per return for post-secondary education (including graduate school and professional courses).

For Self-Employed and Freelancers

Self-Employment Tax Deduction

You can deduct the employer-equivalent portion (50%) of your self-employment tax. This is an above-the-line deduction that many new freelancers miss.

Health Insurance Premiums

Self-employed individuals can deduct 100% of health insurance premiums for themselves and their families — above the line, meaning it reduces AGI directly. This is frequently missed by freelancers who purchase individual coverage.

Retirement Contributions (SEP-IRA, Solo 401(k))

Self-employed individuals can contribute up to 25% of net self-employment income to a SEP-IRA (up to $69,000 in 2026) or up to $23,000 (+ catch-up) to a Solo 401(k). These contributions are fully deductible and grow tax-deferred.

Business Use of Vehicle

If you use your personal vehicle for business (client visits, supply runs, not commuting), you can deduct 67 cents per mile (2026 rate) OR actual expenses (gas, insurance, depreciation, maintenance proportional to business use). Track mileage with an app like MileIQ.

When to Hire a Tax Professional

DIY tax software handles standard situations well. Consider a CPA or Enrolled Agent when you have:

• Self-employment income
• Rental property income
• Stock options or equity compensation
• Multiple state tax filings
• A significant life change (marriage, divorce, inheritance)
• Business ownership with employees

A good tax professional typically saves more than their fee in deductions and credits you would have missed — particularly in the first year when they review prior returns for amendments.