The 10 Most Overlooked Tax Deductions
Did you know there are several commonly missed tax deductions that you might be eligible to claim? You probably know about the standard deduction and some of the more obvious tax write offs, but you can also deduct things like moving expenses, state sales taxes, and mortgage points for a refinance. Learn more about some of the most commonly overlooked tax deductions so you can maximize your refund.
The One Big Beautiful Bill that passed includes permanently extending tax cuts from the Tax Cuts and Jobs Act, including increasing the cap on the amount of state and local or sales tax and property tax (SALT) that you can deduct, makes cuts to energy credits passed under the Inflation Reduction Act, makes changes to taxes on tips and overtime for certain workers, reforms Medicaid, increases the Debt ceiling, and reforms Pell Grants and student loans. Updates to this article are in process. Check our One Big Beautiful Bill article for more information.
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Key Takeaways
- When you itemize deductions, you can deduct either your state and local income taxes or your state and local sales taxes. Typically, the income tax deduction is larger, but if you purchased a big-ticket item such as a car, boat, or airplane, the sales tax might be bigger.
- Small charitable contributions, including the 14 cents per mile deduction for driving you did for charitable work, can be added to the charitable gifts that you made during the year by cash, check or payroll deduction.
- If you’re an active duty military member who’s relocating, you can deduct unreimbursed moving expenses as long as the move is permanent and was ordered by the military.
- When you refinance a mortgage, you can deduct any points you pay over the life of the new loan. In the year you pay off the loan, you get to deduct all the points not yet deducted (unless you refinance your loan with the same lender).
What are the 10 most overlooked tax deductions?
From student loan interest to military moving expenses, claiming overlooked tax deductions can help you keep more money in your pocket. But to take advantage of all the deductions you're entitled to claim, you have to know they exist. Knowledge is the key!
So, to help you identify tax deductions you may not have known about, here's our list of the 10 most overlooked tax deductions. Claim them if you deserve them, and cut your tax bill to the bone.
1. State sales taxes
This write-off makes the most sense for those who live in a state with no income tax. We’re lookin’ at you, Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. However, you must itemize to deduct state sales taxes (which means you can't claim the Standard Deduction).
Here’s why this is a factor. If you claim the deduction for state and local taxes (commonly referred to as the SALT Deduction), you must choose between deducting state and local income taxes or state and local sales taxes. For most residents of income-taxing states, deducting your state and local income taxes is usually the better deal. But if you live in one of the states without an income tax, deducting your sales tax is the way to go if you're claiming the SALT Deduction (assuming your state has a sales tax).
How do you claim the state sales tax deduction?
For those of you in an income-tax-free state, there are two ways to claim the sales tax deduction on your tax return. One, you can use the IRS tables provided for your state to determine what you can deduct. In addition, if you purchased a motor vehicle, boat, airplane, home, or did major home renovations, you may be able to add the state sales tax you paid on these big-ticket items to the amount shown in the IRS tables. Or two, you can keep track of all of the sales tax you actually paid throughout the year and use that.
How do you know how much you can deduct in sales tax?
If you're not using the actual sales taxes paid during the year to figure your sales tax deduction, TurboTax will help you calculate the deductible amount so you don't have to deal with the IRS tables (the IRS also has an online Sales Tax Calculator). Keep in mind, the total of your itemized deductions for all of your state and local taxes is limited to $40,000 for the 2025 through 2028 tax years, with reductions based on your income. This increased from $10,000 per year for the 2018 through 2024 tax years.
2. Alimony paid to a former spouse
If you're paying alimony to an ex-spouse, you might be able to deduct those payments. The catch is that alimony is only deductible if it's paid under a divorce or separation agreement from before 2019. If it's paid according to a post-2018 agreement, the deduction isn't allowed.
You also can't deduct alimony paid under a pre-2019 divorce or separation agreement that's modified after 2018 to expressly state that the alimony isn't deductible or includible in your former spouse's taxable income.
3. Out-of-pocket charitable contributions
It’s hard to overlook the big charitable gifts you made during the year by check or payroll deduction. But the little things can add up, too, and you can write off out-of-pocket costs you incur while doing good deeds if you itemize.
Ingredients for casseroles you regularly prepare for a qualified nonprofit organization’s soup kitchen, for example, or the cost of stamps you buy for your school’s fundraiser can count as a charitable contribution. If you drove your car for a qualifying charity, remember to deduct 14 cents per mile.
4. Student loan interest paid by you or someone else
You can typically deduct student loan interest from your taxes, even if it was paid by someone else on your behalf. Up to $2,500 of interest can be deducted. The IRS treats payments made by someone else as if you received the money and paid the loan yourself, making you eligible for the deduction even if you did pay the money yourself.
5. Moving expenses
If you’re an active duty military member who is relocating for a permanent assignment, you can deduct moving expenses from your taxes, as long as you don’t receive reimbursement from the government for the move.
What can you deduct from your moving expenses?
Qualified expenses that military personnel can deduct include:
- travel and lodging for you and your family
- moving household goods
- shipping vehicles and pets
If your relocation is permanent and ordered by the military, you also don’t pay taxes on any qualified moving expense reimbursements.
How can TurboTax help military members file and claim these deductions?
In honor of our nation's military personnel, enlisted active duty and reserve military personnel can file free federal and state taxes with TurboTax Online using the TurboTax Military Discount. The offer is valid for active duty and reservists of an enlisted rank (E-1 through E-9) with a W2 from DFAS. This offer is not available to National Guard members, and it does not include TurboTax Experts products.
As the #1 best-selling tax software, TurboTax easily handles military tax situations, including:
- military and civilian income—including combat pay, BAS, and BAH
- military-related deductions
- PCS relocations and state residency determination
Simply start your TurboTax Online return and use your military W-2 to verify rank, and your savings will be applied when you file.
TurboTax Tip:
Tax credits, such as the Child and Dependent Care Credit and the Earned Income Credit, are even better than a tax deduction because they reduce your tax bill dollar for dollar.
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 expenses paid during the tax year for:
- professional development courses related to the curriculum or students you teach
- 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.
If both you and your spouse qualify and file a joint return, you each can deduct up to $300 of qualified expenses (for a total of up to $600).
7. Gambling losses
There might be a silver lining if you have some bad luck at the casino, betting on horses, or even playing the lottery – you might be able to deduct your gambling losses on your federal income tax return. However, you can't deduct more than the gambling winnings you report as income on your return. For example, if you have $2,000 in gambling winnings and $3,000 in gambling losses, you can only deduct $2,000 of your losses.
In addition, you can only deduct gambling losses if you claim itemized deductions on your return. If you take the Standard Deduction, you can't write off your gambling losses.
8. State income tax you paid last spring
Did you owe taxes on your state income tax return last year? Then remember to include that amount with your state income tax itemized deduction on this year’s return, along with state income taxes withheld from your paychecks or paid via quarterly estimated payments.
9. Refinancing mortgage points
When you buy a house, you can usually deduct the points you paid to secure your mortgage in a single year if you itemize. When you refinance a mortgage, however, you have to deduct the points over the life of the new loan. That means you can deduct 1/30th of the points a year if it’s a 30-year mortgage—that’s $33 a year for each $1,000 of points you paid. Doesn't seem like much, but why throw it away?
Also, in the year you pay off the loan—because you sell the house or refinance again—you get to deduct all the points not yet deducted, unless you refinance with the same lender.
10. Jury pay paid to employer
You can deduct jury fees that you turn over to your employer, so you aren’t taxed on income that simply passes through your hands. Some employers continue to pay your full salary while you serve on a jury, but require that you submit your jury pay to the company. Normally, those fees are considered taxable income, but by deducting the amount given to your employer, you avoid being taxed on money you don’t actually keep.
How can TurboTax help with filing and claiming my deductions?
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