Guide to Commonly Missed Tax Deductions for 2025 Returns: Eligibility and Documentation

Guide to Commonly Missed Tax Deductions for 2025 Returns: Eligibility and Documentation

n about their home office, and boom—an extra $1,400 deduction they’d been missing for three straight years.

That experience shoved one lesson in my face: most people are leaving perfectly legal tax deductions on the table simply because they don’t know they exist—or they’re scared of “red flags.” For 2025 returns (covering the 2024 tax year), the landscape hasn’t radically changed, but how you use the rules absolutely can.

I’ll walk you through the deductions I see missed the most, who actually qualifies, and what documentation the IRS expects you to have ready if they ever come knocking.

1. Home Office Deduction (Even If You’re Not a Full-Time Freelancer)

I used to think the home office deduction was only for people who live on coffee and Upwork. I was wrong.

If you’re a self-employed person, contractor, consultant, or side hustler filing Schedule C, there’s a good chance you qualify. The key test isn’t hours worked; it’s how you use the space.

Eligibility

You generally qualify if:

• You use a specific area of your home regularly and exclusively for business; AND
• It’s your principal place of business or where you meet clients/customers.

If you’re a W-2 employee working from home, this is where the bad news comes in: under the Tax Cuts and Jobs Act (TCJA), unreimbursed employee expenses (including home office) are suspended through at least 2025 for most taxpayers. I’ve had to gently break that to a lot of remote workers.

What You Can Deduct

Two main methods:

• Simplified method: $5 per square foot, up to 300 sq ft (max $1,500)
• Actual expense method: Percentage of your home used for business applied to:
• Rent or mortgage interest
• Property taxes
• Utilities
• Homeowners insurance
• Repairs & maintenance (sometimes fully deductible if specific to the office)

Documentation That’s Actually Useful

When I tested the actual expense method on my own side gig, here’s what I kept:

• A rough floor plan or sketch showing square footage of the office vs home
• Lease or mortgage statement + annual mortgage interest report (Form 1098)
• Utility bills, property tax statement, and homeowners/renters insurance bills
• Photos of the office area (not required, but they help prove “exclusive use” if questioned)

I’ve never had the IRS ask a client for blueprints. They care more that your story and numbers make sense and are consistent.

2. State and Local Tax (SALT) – Still Capped, Still Misunderstood

I routinely see people double-count or undercount this one.

For 2025 returns (2024 tax year), the SALT deduction is still capped at $10,000 ($5,000 if married filing separately). That includes:

• State and local income taxes OR state and local sales taxes (you usually choose one)
• Property taxes on real estate

Eligibility

You must be itemizing deductions on Schedule A. If your standard deduction is higher than your total itemized deductions, SALT is basically irrelevant for you.

For 2024 returns filed in 2025, the standard deduction is:

• $14,600 – Single
• $21,900 – Head of Household
• $29,200 – Married Filing Jointly

So if your total itemized deductions (SALT + mortgage interest + charitable + medical, etc.) don’t exceed those numbers, you won’t benefit from SALT.

Smart Documentation

What I ask clients for:

• Final paystub showing year-to-date state/local tax withholding
• Form W-2 (Boxes 17–19)
• Property tax bills (both installments)
• If using sales tax instead of income tax: big purchase receipts (car, boat, etc.) plus the IRS sales tax table printout

Pro tip I’ve seen save headaches: don’t try to deduct both state income tax and full state sales tax. You choose one category, and the software will usually nudge you.

3. Medical and Dental Expenses – The “Almost-There” Deduction

I used to ignore this for clients unless there was a major surgery year. Then I met a family who’d quietly piled up out-of-pocket costs—braces, infertility treatments, out-of-network specialists—and they finally cleared the threshold.

Eligibility

You can deduct unreimbursed qualified medical and dental expenses that exceed 7.5% of your adjusted gross income (AGI) if you itemize.

Example: If your AGI is $80,000, 7.5% is $6,000. If you spent $9,000 unreimbursed, you can potentially deduct $3,000.

Eligible expenses can include:

• Insurance premiums you pay with after-tax money (COBRA, Marketplace plans)
• Doctor, dentist, chiropractor, mental health, and many specialist visits
• Prescriptions
• Certain long-term care costs
• Travel for medical care (mileage at IRS medical rate)

Documentation That Actually Moves the Needle

What’s worked best for me:

• Year-end summaries from your health insurer and pharmacy
• Receipts for big-ticket items: surgery, orthodontics, IVF, etc.
• Proof of payment, not just statements

Downside: this one’s a bit of a pain. Upside: in high-expense years, it can be huge. I usually tell people: if you think you were close to that 7.5% mark, it’s worth doing the math once.

4. Retirement Contributions You Forgot You Made (or Could Still Make)

One of my favorite “late saves” each year is the person who panics in March… and then we realize they can still lower last year’s tax bill by making a retirement contribution.

Traditional IRA Contributions

For 2024 (filed in 2025):

• Contribution limit: $7,000 (under 50), $8,000 (50+)
• You can contribute up to the tax filing deadline (typically April 15, 2025) and still count it for the 2024 tax year if you designate it correctly.

Whether it’s deductible depends on your income and whether you (or your spouse) are covered by a workplace retirement plan.

Solo 401(k) & SEP-IRA for Self-Employed

When I tested a Solo 401(k) as a consultant, it was the single biggest tax lever I had.

• SEP-IRA: contributions can usually be made up to your filing deadline (plus extensions), based on a percentage of net self-employment income.
• Solo 401(k): employee deferrals generally must be elected by year-end, but employer contributions may be made later, depending on plan setup.

Documentation

• Account statements showing contribution amounts and dates
• Plan adoption documents for Solo 401(k)
• If you changed custodians, get proof from both old and new providers

I’ve seen the IRS question IRA deductions when the 5498 form (sent by the brokerage in May) didn’t match the tax return. Keep your own records; don’t rely solely on the brokerage to track prior-year designations correctly.

5. Education-Related Breaks People Confuse Constantly

Education is where I see the most chaos—credits vs deductions, 529 plans vs tuition credits, who can claim what.

Two big areas people miss:

American Opportunity Tax Credit (AOTC)

If you (or your dependent) are in the first four years of post-secondary education:

• Worth up to $2,500 per eligible student
• 100% of first $2,000 in qualified expenses, 25% of next $2,000
• Up to 40% refundable (you can get money back even if you owe $0)

Lifetime Learning Credit (LLC)

• Up to $2,000 per return
• Can be used for grad school, part-time, and job-skill courses
• More flexible but not refundable

You generally can’t double-dip the same expenses for multiple credits or deductions.

Key Documentation

In my experience, these three pieces are non-negotiable:

• Form 1098-T from the school
• Detailed account statement from the bursar’s office (shows what was actually paid and when)
• Records of scholarships, grants, and 529 distributions

I’ve seen people try to claim amounts they were never out of pocket for because they forgot about a late-posted scholarship. The IRS computer systems are surprisingly good at cross-checking the 1098-T.

6. Charitable Giving – Cash, Stuff, and the One Everyone Forgets

I once watched someone proudly hand over a shoebox of Goodwill receipts. When we totaled it, the value was… $83. Still counts, but there are often bigger opportunities.

Eligibility

To claim charitable deductions you must:

• Itemize deductions
• Give to qualified 501(c)(3) organizations, not individuals or GoFundMe campaigns (unless run by a qualified charity)

Commonly Missed Pieces

• Non-cash donations: clothing, furniture, electronics
• Mileage for volunteering (at the IRS charitable rate)
• Appreciated stock donations: usually more tax-efficient than cash if you’re already investing

Documentation That Holds Up

• For cash donations: bank records or receipts from the charity
• For non-cash items:
• Donee acknowledgment letter
• Detailed list with fair market value estimates
• For larger donations (over $5,000 non-cash): a qualified appraisal may be required

The trick I use personally: snap a quick photo of any big donated item before it leaves the house and email it to myself with the date and rough value. Not perfect, but it creates a trail and jogs my memory at tax time.

7. Self-Employed “Hidden” Deductions: Phone, Internet, and Mileage

When I first started freelancing, I underestimated how many everyday costs had a legitimate business component.

Commonly Missed for Independent Workers

• Business portion of cell phone and internet
• Mileage: client meetings, supply runs, business travel
• Software and subscriptions: accounting tools, design tools, SaaS platforms

Eligibility & Limits

You can deduct the business-use percentage of mixed-use expenses. If 60% of your phone use is business (reasonably documented), then 60% of your phone bill can often be deducted on Schedule C.

Mileage is either:

• Standard mileage rate (set annually by IRS) * miles driven for business
• Actual expenses (gas, repairs, insurance) multiplied by business-use percentage

Documentation You’ll Thank Yourself For

When I tested different tracking approaches, this combo worked best:

• Mileage tracking app or detailed log with date, purpose, start/end locations, and miles
• Monthly phone and internet bills with notes or an estimate of business-use percentage
• Receipts and invoices for all software tools (Google Workspace, Canva, Adobe, etc.)

Downside: it takes discipline. Upside: I’ve seen this group of deductions reduce taxable income by five figures for active freelancers.

A Quick Word on Red Flags and Reality

I hear this a lot: “I don’t claim that because I don’t want to trigger an audit.”

In my experience, the bigger risk isn’t claiming legitimate deductions with proper support—it’s:

• Overstating expenses wildly out of line with your income
• Having no documentation when asked
• Mixing personal and business expenses without a clear method

The IRS doesn’t hate deductions. They hate nonsense. If you:

• Stay honest
• Keep reasonable records
• Avoid making up numbers that “feel right”

…you’re operating in the zone where most enrolled agents and CPAs are completely comfortable.

That said, tax law is complex and your situation is unique. There are limits, phaseouts, and exceptions I haven’t covered in a single article. When your numbers get big, or your situation is messy (multiple businesses, rental properties, stock options), looping in a professional for at least one review year can easily pay for itself.

Final Thought: Don’t File in the Dark

When I started tracking these “little” deductions more carefully—for myself and for clients—the pattern was obvious: it wasn’t one magic write-off. It was a dozen medium ones that, together, made a real difference.

If you take one action for your 2025 return, make it this: build a simple documentation habit now. A folder in your email, a shared drive folder for receipts, a note on your phone for mileage—doesn’t matter, as long as it’s consistent.

The tax code rewards people who can prove their story. If you do the boring record-keeping, you get to keep more of your money. And that, in my experience, feels a lot better than handing it over because you “weren’t sure you could deduct that.”

Sources

• IRS Publication 587 – Business Use of Your Home (Including Use by Daycare Providers) - Official IRS guidance on home office rules and calculations
• IRS Publication 502 – Medical and Dental Expenses - Detailed list of what medical expenses qualify for deduction
• IRS – Tax Benefits for Education: Information Center - Official overview of AOTC and Lifetime Learning Credit rules
• IRS – Retirement Topics: IRA Contribution Limits - Current annual limits and eligibility details for IRA contributions
• Forbes – 10 Most Overlooked Tax Breaks - Commentary on frequently missed deductions and practical examples