Commonly Overlooked Deductions: Don't forget these ideas to lower your taxes

The tax code is about 75,000 pages long, so it's not surprising there are many overlooked money-saving deductions hidden within it. Check out this list of commonly overlooked deductions. You might wind up with a bigger refund than you expected.

1. State sales tax alternative

   
   

   You can choose to deduct state and local sales taxes rather than state income taxes on a return using itemized deductions. This is especially useful for residents of states that don't have state income taxes. It can also be used if you made enough purchases during the year that your state sales tax deduction is larger than your state income tax deduction. This is especially relevant right now: the SALT itemized deduction cap rose from $10,000 to $40,000 in 2025 and now sits at $40,400 for 2026, with small increases scheduled through 2029. The higher cap phases down for taxpayers with modified adjusted gross income above $505,000, floored at the old $10,000 minimum, and the whole provision reverts to $10,000 in 2030 unless Congress extends it.

   
   

2. Mortgage discount points

   
   

   When you buy a home you can generally deduct the cost of mortgage discount points to lower your interest rate. A point is a fee equal to one percent of the mortgage amount and it lowers your mortgage's interest rate. When you refinance a mortgage, you spread the cost of your points over the life of the mortgage. Many taxpayers forget that when they sell their home they can immediately deduct the remainder of the points not yet used as a deduction.

   
   

3. Student loan interest

   
   

   You can deduct up to $2,500 in interest paid on student loans from your tax return. This is true even if someone else helps you pay your loans. Parents who have co-signed student loans, creating a legal obligation for the debt, often forget that they are also now eligible for the deduction on payments made by them.

   
   

4. Alimony and child support mistakes

   
   

   While most people who pay alimony know it's tax-deductible for those who pay it on divorce decrees finalized before the end of 2018, it is easy to forget it is not taxable income to those receiving it if your divorce was after this date or there was an amendment to your divorce decree after this date. This law change also impacts the taxability and deductibility of child support payments.

   
   

5. Re-invested dividends

   
   

   Many people automatically reinvest their dividends within their portfolios. These dividends are taxed when they are paid to you each year, so it is easy to forget to make this adjustment to your tax bill when you sell them at a later date. While this makes your capital gain calculation a bit complex, knowing this keeps you from paying too much in tax.

   
   

6. Child and dependent care

   
   

   If you are working and paying for daycare, review this credit on your tax return and with your employer. Both may offer a meaningful tax benefit to you. The same holds true for married couples when both work or are looking for work. And if the benefit exists through your employer, you may still be able to take advantage of the credit through the IRS as long as the qualified expenses are not double counted.

   
   

7. Self-employment deductions

   
   

   There are many commonly overlooked benefits for sole proprietors and S corporation business owners. Chief among them: half of self-employment tax, health insurance premiums (check your W-2 to see if the premium was added to income and whether it's deductible for your situation), contributions to retirement plans (a SEP IRA contribution before you file can quickly reduce taxable income), and the QBI deduction. The QBI deduction was made permanent under recent tax law changes and allows eligible pass-through owners to deduct 20 percent of qualified business income indefinitely, though wage and income limitations can reduce it for higher earners, so it's worth confirming eligibility rather than assuming it applies.

   
   

8. Other small business tax breaks

   
   

   There are a number of other special business incentives built into the tax code, including special depreciation rules and the research credit, which has been a permanent part of the tax code since 2015.

As with any part of the tax code, certain qualifications must be met and limits apply. Please feel free to ask for help if you think any of these ideas apply to you.

Check out our article: Tax-Free Income: 10 Types of Income the IRS Does Not Tax

If you have questions about this topic, speak with your CPA or accountant. And if you need guidance or a second opinion, you’re always welcome to contact us.