5 Most Overlooked Tax Deductions

Itemizing might save you more than the standard deduction

Reviewed by Lea D. Uradu
Fact checked by Kirsten Rohrs Schmitt

Itemized tax deductions give many American wage earners a chance to pocket more income instead of handing their hard-earned cash to the government. Many taxpayers are unaware of the various deductions available that could impact their tax refunds. With proper record-keeping, these deductions can mean more money for you and less for the Internal Revenue Service (IRS).

Key Takeaways

• Itemizing your tax deductions may allow you to keep more of your income.
• Missing an itemized deduction could cost you a larger refund.
• The 2017 Tax Cuts and Jobs Act (TCJA) changed many tax rules, eliminating some deductions while allowing others to be itemized.
• Homeownership expenses, medical expenses, and charitable giving are common deductions.
• Some deductions, such as unreimbursed job expenses and tax preparation fees, were eliminated, but gambling losses and student loan interest remain deductible.

Tax Cuts and Jobs Act Rule Changes

The Tax Cuts and Jobs Act of 2017 (TCJA) significantly increased the standard deduction and has continued to adjust it annually. So, before you go to the trouble of filling out that Schedule A form for itemizing, consider whether itemizing or taking the standard deduction is more beneficial for you.

The standard deduction is the portion of your income not subject to income tax. You can take the standard deduction if you choose not to itemize your deductions on Schedule A.

Here’s a breakdown of the standard deduction amounts by filing status for tax years 2024 and 2025.

Keep in mind that the TCJA eliminated personal exemptions, so you should factor that into your calculations.

The law also eliminated or changed the rules for several tax deductions that you were able to take in 2017. On the other hand, the TCJA doesn’t limit overall itemized deductions according to your adjusted gross income (AGI), which is at least one positive change for itemizers.

If your itemized deductions total less than the amounts listed above, the standard deduction is likely your best option. If your deductions exceed the standard deduction, read on to discover some of the most overlooked itemized deductions that can further increase your savings.

Important

Unless you have more deductible expenses than the standard deduction, you’ll be better off taking the standard deduction.

1. Tax Deductions for Homeowners

Owning a home can give you hefty tax write-offs each year. Here’s a summary:

• Mortgage Interest: If you purchased your home before December 16, 2017, you can deduct mortgage interest on loans up to $1 million. For homes bought after December 15, 2017, the limit is $750,000. This limit is set to return to $1 million in 2025.
• Points: Points charged by lenders in exchange for better interest rates are deductible. One point is equal to 1% of the total amount you mortgage. You can’t deduct the total points in the year you pay them. Instead, you typically deduct them over the life of the loan.
• Property Taxes: The TCJA limits deductions for property taxes and other state and local taxes (SALT). For tax years 2018 through 2025, you can take a combined total deduction of $10,000 ($5,000 for married couples filing separately) for state and local income, sales, and property taxes.
• Home Office Deduction: If you use part of your home exclusively for business purposes, you may deduct a percentage of home costs related to your work.
• Selling Costs: When selling your home, you can deduct expenses like real estate agent commissions, title insurance, legal fees, advertising costs, administrative costs, escrow fees, and inspection fees. If you sell at a profit, you can exclude up to $250,000 of capital gains from your income or up to $500,000 if you’re married filing jointly.

Note

The mortgage credit certificate (MCC) allows low-income, first-time homebuyers to benefit from a mortgage interest tax credit of up to 20% of the mortgage interest payments—up to $2,000 per year. To take the credit, you must first apply for a certificate through your state or local government.

2. Vehicle Sales Tax Deduction

You pay a sales tax on your car when you buy it. Some states continue to tax you each year simply for the privilege of using a car on public highways. Most states also send out a notice to demand their tax payment to register your car each year. You may be able to add that cost to your deductions for personal property taxes in April.

If your state calculates a percentage of the vehicle registration based on the value of your car, you can deduct that percentage as part of your personal property taxes. The percentage of the vehicle registration based on the weight of your car is not tax-deductible.

For example, in New Hampshire, a portion of car registration is deductible (the municipal portion, which is calculated based on value), and a portion is not deductible (the state portion, which is based on weight).

The same goes for an RV or boat. Check the registration paperwork to see if you are paying property taxes on those, too, and keep in mind the $10,000 cap on total SALT taxes.

Investopedia’s Tax Savings Guide can help you maximize your tax credits, deductions, and savings. Order yours today.

3. Tax Deductions for Charitable Donations

You donated your skinny jeans and wagon-wheel coffee table to Goodwill, which, in turn, reduces your taxes by increasing your charitable deductions. The IRS requires that you provide “a qualified appraisal of the item or group of items” if you claim a deduction of more than $5,000 per item (or a group of similar items).

For items such as electronics, appliances, and furniture, you may need to pay a professional to assess the value of your donation.

For tax years 2024 and 2025, you can no longer deduct up to $300 ($600 if you’re married and filing jointly) in cash donations made to qualifying charities, even if you take the standard deduction. This is an above-the-line deduction, a 2021-only benefit that no longer applies.

You can generally deduct 20% to 60% of your adjusted gross income (AGI) for charitable contributions if you itemize. The amount varies depending on the type of contribution and the type of charity.

4. Tax Deductions for Volunteers

If you incur expenses while volunteering, such as travel costs, you can add those to your charitable deductions. However, the value of your time is not deductible. 

The trip’s primary purpose must be for charity, with no substantial element of a vacation. According to the IRS, to qualify, you must be “on duty in a genuine and substantial sense throughout the trip.”

No matter what type of transportation you use, you’ll need good records of your charitable activities. Keep detailed records, including receipts for transportation, parking, and tolls, and logs for mileage (deductible at $0.14 per mile for charitable purposes). 

5. Tax Deductions for Medical Expenses

Medical expenses exceeding 7.5% of your AGI are deductible. So, for example, if your AGI is $50,000, you can only deduct the portion of your medical expenses over $3,750.

If your insurance company reimburses you for any of your expenses, that amount cannot be deducted. If it reimburses you in a future tax year for any portion of expenses claimed in the current year, you will need to add the reimbursement (up to the amount you took as a deduction) as income in the future year.

Long-Term Care Insurance

A portion of the money you pay for long-term care insurance can also minimize your tax burden. Long-term care insurance is a deductible medical expense. The IRS lets you deduct an increasing portion of your premium as you age, but only if your employer or spouse’s employer does not subsidize the insurance.

Travel for Medical Care

Transportation costs for medical appointments, such as mileage ($0.22 per mile for 2023 and $0.21 per mile for 2024), parking, tolls, and lodging are deductible if they exceed the 7.5% threshold. Keep in mind that you can only deduct up to $50 per person per night of lodging (you can include lodging for a person traveling with you).

Other Medical Costs

You can deduct any additional co-payments, prescription drug costs, and lab fees as part of your medical expenses if the total exceeds the 7.5% limit. The IRS allows you to factor in common fees and services if they are not fully covered by your insurance plans, such as therapy and nursing services. The IRS’s definition of medical expenses is pretty broad and can include things like acupuncture and smoking cessation programs.

Important

Contributions to health savings accounts (HSAs) are tax-deductible. If you have a high-deductible health plan (HDHP), you can contribute up to $4,150 for the tax year 2024 ($8,300) for an individual with a family plan. For the tax year 2025, the contribution limit is $4,300 for an individual and $8,550 for a family HDHP.

Other Tax Deductions

The TCJA eliminated most deductions that previously fell under “miscellaneous itemized deductions.”

Many of these deductions were subject to a 2%-of-AGI threshold, meaning you could only deduct the amount that exceeded 2% of your AGI. You can no longer deduct the following:

• Unreimbursed job expenses, such as work-related travel and union dues 
• Unreimbursed moving expenses if you had to move in order to take a new job (exception: active-duty military moving because of military orders)
• Most investment expenses, including advisory and management fees
• Tax preparation fees (except for fees to prepare Schedules C, E, or F, which are deductible business expenses)
• Fees to contest an IRS ruling 
• Hobby expenses
• Personal casualty or theft losses, except in federally designated disaster areas

Here’s what you can still deduct:

• Gambling losses up to your winnings
• Interest on the money you borrow to buy an investment 
• Casualty and theft losses on income-producing property
• Federal estate tax on income from certain inherited items, such as IRAs and retirement benefits
• Impairment-related work expenses for people with disabilities
• Student loan interest (limited to the lesser of $2,500 or total interest you paid in the year)

What Can Homeowners Deduct?

Homeowners benefit from several tax deductions, including those for mortgage interest, points, property taxes, and home office expenses.

What Can I Deduct If I Sell a Home?

When selling a home, you can deduct expenses such as real estate agent commissions, legal fees, advertising costs, administrative fees, escrow fees, and inspection fees.

What Is the Standard Deduction?

For tax year 2024, the standard deduction is $14,600 for single and married filing separate taxpayers. For heads of household, it is $21,900. And for married filing jointly or qualifying widow(er) taxpayers, it’s $29,200. For tax year 2025, those figures are $15,000, $22,500, and $30,000, respectively.

What Can I Claim as a Tax Deduction Without a Receipt?

The IRS requires taxpayers to keep documentary evidence to support reported expenses. If you are eventually audited and cannot provide receipts, alternatives such as canceled checks and credit or debit card statements might be acceptable.

The Bottom Line

Taxpayers can take advantage of valuable deductions available to them if they decide to itemize. Hold on to receipts for services and keep a file throughout the year to record even the smallest expenses you incur for business, charity, and your health. As those expenses add up, they may ultimately lower your tax bill.