Don’t miss out on these 10 often overlooked tax breaks
Wednesday, March 12, 2025
The goal of every taxpayer is to pay Uncle Sam as little as legally possible. Even the Internal Revenue Service has enshrined that goal in its Taxpayer Bill of Rights. It’s number 3 on the 10-point list.
A good way to ensure you pay no more tax than required is to claim all the tax breaks for which you qualify. But every filing season, too many taxpayers overlook ways to trim their tax bills.
This costly oversight is especially prevalent as Tax Day nears and people just want to be done with their taxes. With April 15 on the horizon, don't be one of this filers.
Take the time you need to check out all the tax breaks that can help cut your bill. Here are 10 that are often overlooked to get you started.
1. Earned income tax credit (EITC): The Earned Income Tax Credit, or EITC, was created to help reduce the amount of tax that lower- and moderate-income wage earners owe. But every year, says the IRS, around 20 percent of EITC-eligible taxpayers miss out on the credit.
That's too bad, since the EITC could provide substantial tax savings, ranging on 2024 tax returns from $632 for single taxpayers with no children to $7,830 for taxpayers with three or more qualifying children.
Even better, since it’s a tax credit, your EITC amount offsets any tax you owe dollar-for-dollar.
Best of all, it’s one of the few refundable tax credits, meaning if the amount is more than your tax liability, you get the excess as a refund.
The EITC amount is based on your income and the size of your family. And yes, it can be a hassle to figure. But the potential for a sizeable tax savings, or even a refund, should help ease the effort.
Plus, you might be able to get some help doing the computations. If you qualify for the EITC, you also are likely are eligible to get help from the IRS-trained volunteers at Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (Tax Counseling for the Elderly), who can help with your EITC claim.
2. Dependent care costs: Ask any working parent about the cost of raising a family and they'll tell your that one of the biggest expenses is childcare. The tax code can help here.
The Child and Dependent Care Tax Credit could provide a credit of up to $1,050 for the expenses to care for one child, or up to $2,100 in costs to care for two or more youngsters. Yes, I know that's less than parents pay for care of their kiddos, but every bit that cuts your tax bill helps.
Also note the tax break's full name. If you have other, older dependents who need looking after so you can work, use the Child and Dependent Care Tax Credit to pay for those costs, too.
3. Credit for other dependents: Those older dependents also might help you qualify for another tax credit. The Credit for Other Dependents is worth $500 to taxpayers who are providing for older youngsters, aging parents, or other older relatives who are part of your household.
4. Deductible IRA contributions: Traditional IRAs are still popular for many people for a variety of reasons. One them is that contributions, in full or part, to these retirement vehicles might be deductible. This twofer — getting an immediate tax break while saving for your post-work years — also is a tax break that still available for the prior tax year.
You have until Tax Day — that's the regular April 15 date this year — to establish and put money into a traditional IRA for the 2024 tax year. That's a maximum $7,000 if you're younger than 50, or $8,000 if you're age 50 or older. Note that those are the maximum contribution amounts. If you made less than that, then you can only contribute as much as your total earned income for the year.
5. Spousal IRA option: Relationships take many forms, and while there are a lot of couples where both spouses work, sometimes they rely on one income. In these cases, a couple where one spouse doesn't work might be able to achieve some tax savings through a spousal IRA.
The officially titled Kay Bailey Hutchison Spousal IRA, named after the former U.S. Senator from Texas who championed the plan, allows the couple to use the income-earning spouse's amount to calculate eligibility and contribution limits for the spouse who didn't get any paychecks.
Contributions can be made to the spousal IRA up to the current limits, which are the same as other IRAs. Again, for 2024, that's $7,000 per account, or $8,000 for filers age 50 or older. Again, as noted in overlooked tax break #4, your contribution is limited to the total amount the working spouse earned if it's less than the maximum contribution level.
If your marital and work situation applies here, check out the Kay Bailey Hutchison Spousal IRA in IRS Publication 590-A.
6. Retirement savings credit: If you do put some money into an IRA, traditional or Roth version, or a workplace or self-employment retirement plan, you also might be able to get a bonus tax break. The Saver's Credit is available to lower- and middle-income earners who contribute to retirement savings. It's worth up to $1,000. And because it's a tax credit, that $1,000 can erase that much of any tax you owe.
7. Lifetime learning tax lessons: Many students are well beyond the traditional tender college ages. They are taking classes, for example, to enhance their job skills and improved their chances for promotions and pay raises.
The Internal Revenue Code recognizes this effort via the Lifetime Learning Credit. It’s calculated as 20 percent of the first $10,000 in qualifying expenses paid per year, up to a maximum credit of $2,000. When the former tuition and fees tax deduction was eliminated a few years ago, many of those qualifying costs transferred to the Lifetime Learning tax credit. The income eligibility ranges also were expanded so that more individuals could claim it.
8. Student loan interest deduction: With student loan relief in flux under the Trump administration, many who borrower money are looking for other ways to save. One option is the tax break on a portion of the interest paid on college debt. You can deduct up to $2,500 (or the actual amount, whichever is less) of the interest paid on qualified student loans. You don’t have to itemize to claim this deduction; it’s one of the two dozen adjustments to income popularly known as above-the-line deductions. It can be claimed on Form 1040 Schedule 1 (specifically line 21) for interest paid on a qualified student loan for yourself, a spouse, or a dependent.
9. Jury pay tax deduction: A legal drama is fun to watch, but actually doing our civic duty by serving on a jury generally is something most of us try to avoid. At least when we are selected to sit in the jury box, we’ll be paid for our time. Some employers, however, require employees to surrender jury pay to the company, since the employee still got a regular salary while the trial was underway.
Jury pay is considered taxable income by the IRS. However, if you must turn the amount over to your boss, you can deduct that amount you surrender. This, too, is one of the above-the-line deductions. It’s found on line 24a of Form 1040 Schedule 1.
10. Larger standard deductions for older filers: The standard deduction that most of now claim when we file our taxes is based on our filing status. But a couple of other factors can come into play here.
Older, as well as visually impaired taxpayers of any age, generally can claim additional standard deduction amounts just by checking boxes on Form 1040 or Form 1040-SR, which was created especially for senior citizen taxpayers.
For the 2024 tax year, single and head of household filers age 65 or older and/or legally blind taxpayers get an additional $1,950 standard deduction amount for each qualifying circumstance. Older joint filers and surviving spouses get an additional $1,550 bump to the standard amount for each instance.
If you use tax software or hire a tax preparer to help you file, they should make sure that you don’t miss any potential tax break for which you qualify. But it never hurts to know what to look for as you go through the computer program or discuss your return with your tax pro.
And the possible tax savings could be enough to cover the price you paid for the filing help.
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