The Best Tax Deductions and Tax Breaks for 2024-2025

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You’re probably already aware that you don’t have to pay federal income tax on all of your earnings. However, exactly what are you allowed to deduct from your taxes to lower your total taxable income and finally get a tax break? 

Although certain tax rates and deductions remain relatively stable from year to year, others change or disappear entirely, so before you bust out the tax software, make sure you know the best tax deductions and breaks for this year.

Quick Take: What Is a Tax Deduction?

Tax deductions help lower your taxable income, meaning you pay less in taxes. But which ones can you claim? A tax deduction is an expense you can subtract from your income to reduce how much tax you owe. Common deduction categories include homeownership, education, healthcare and business expenses.

The Best Tax Deductions and Breaks for 2024-2025

Many Americans are confident they’re claiming every tax deduction they qualify for — but are they really? If you’re handling your own taxes this year, it might be worth checking in with a certified public accountant to make sure you’re not missing out on money-saving opportunities you didn’t even know existed.

Health and Medical Deductions

Medical and Dental Expenses

You can deduct medical and dental expenses for yourself, your spouse and your dependents when you pay taxes. 

If you make improvements to your home for medical purposes — such as adding wheelchair ramps or lowering cabinets for better accessibility — you can deduct those renovations as medical expenses.

However, you can only deduct the amount of your total medical expenses that exceed 7.5% of your adjusted gross income.

Self-Employed Health Insurance

Self-employed individuals with a net profit can deduct self-employed health and long-term care insurance without having to itemize deductions. You can include premiums for yourself, your spouse, your dependents and your children, whether or not the children are your dependents.

If you don’t claim 100% of your eligible insurance costs, you can put the remainder toward your itemized medical expense deduction.

Be mindful of the FICA tax rate as well, which includes Social Security and Medicare taxes. If you’re self-employed, you’d be responsible for these taxes.

Health Savings Account Contributions

Health savings accounts are tax-exempt accounts that you use to pay or reimburse certain medical expenses if you have a high-deductible health plan.

As of 2024, you can contribute up to $4,150 per year if you have self-only coverage and $8,300 if you have family coverage. You can deduct the amount you or someone other than your employer made to your account.

Homeowner and Property Deductions

Homeowner Tax Deductions

If you itemize deductions, you may be able to deduct mortgage interest on up to $750,000 of your home loan debt — this goes up to $375,000 if you’re married filing separately. This deduction helps lower your taxable income, but only if you itemize.

You may also deduct mortgage points — prepaid interest paid at closing — as long as they meet IRS requirements.

Home Sale

If you sold your primary home at a profit, you can exclude up to $250,000 of gains from your income. If you’re married and filing jointly, you can exclude $500,000.

Retirement and Investment Deductions

IRA Contributions or 401(k) Contributions

Although IRS rules don’t allow deductions for Roth IRA contributions, you might be able to claim the amount that you put in a traditional IRA or 401k plan.

• Contributions limits for IRAs increased slightly in 2024, up to $7,000, while 401(k) limits jumped to $23,000.
• If you’re 50 or older, you can contribute an additional $1,000 to an IRA and $7,500 to a 401(k) plan via “catch-up” contributions.

Investment Interest Expense

You can, however, claim a deduction for your investment interest expense, which is the interest paid on money borrowed to purchase taxable investments.

The amount that you can claim for the deduction is capped at your net taxable investment income for the year.

Education and Work-Related Deductions

Student Loan Interest

You can deduct some or all of any qualified student loan interest you paid during the tax year. You can deduct the lesser of $2,500 or the amount you actually paid.

You can’t claim the deduction if you’re married and filing separately, or if you or your spouse are listed as dependents on someone else’s tax return.

Educational Expenses

Under the American Opportunity tax credit, you can deduct up to $2,500 per student for four years of postsecondary education. The credit is partially refundable, which means you can get up to 40% of the credit, or $1,000, as a refund if the credit reduces your tax liability to $0.

The Lifetime Learning Credit offsets your tax liability by 20% of your first $10,000 in qualified education expenses, up to a $2,000 limit per year.

Work-Related Meals and Gifts

After the tax reform in 2017, entertainment expenses for business purposes were no longer deductible, and meal deductions were limited to 50%. While that limitation was boosted during the pandemic, it expired in 2023, and the allowable meal deduction returned to 50%.

Up to $25 of the cost of a business gift can be deducted.

Business and Self-Employed Deductions

Home Office Deduction

The home office deduction applies only to self-employed individuals — not remote employees.

To qualify, the space must be used exclusively for business and serve as your principal place of work. If you meet these criteria, you may also deduct business-related mileage, but remember: regular commuting doesn’t count.

Business Travel Expenses

Self-employed individuals can deduct necessary and reasonable business travel costs, including transportation, lodging and meals.

To qualify, the trip must be for business purposes. Lavish or personal expenses don’t qualify. You’ll typically claim these deductions on your Schedule C when filing taxes.

Car for Business Use

If you use your car for your job or business, you might be able to deduct the costs. You can either use a standard mileage rate or the actual expense method, which is what it actually costs to operate the car for its business-use portion.

Standard and Other Key Deductions

Standard Tax Deduction

The standard deduction is a dollar-for-dollar reduction of your taxable income. Nearly all taxpayers are entitled to this deduction.

The standard deduction amounts for tax year 2024 are as follows:

• Single filers: $14,600
• Married filing separately: $14,600
• Married couple filing jointly: $29,200 
• Heads of household: $21,900 

Earned Income Tax Credit

The earned income tax credit is a refundable credit for low- to moderate-income workers. This means you may receive a refund even if you don’t owe taxes. The credit amount depends on your income and how many qualifying children you have.

• For 2024, married couples filing jointly with income under $66,819 may qualify.
• Credit amounts range from $632 (no children) to $7,830 (three or more children).

Charitable Cash Contributions

You can generally deduct up to 60% of your adjusted gross income for cash donations to qualified charities. Lower limits may apply in some cases.

State and Local Tax Deduction

You may be able to deduct up to $10,000 combined for state and local income, sales and property taxes — a big help if you live in a high-tax state like California or New York.

Keep in mind: you’ll need to choose between deducting income or sales tax, whichever works better for your situation.

Miscellaneous Deductions

• Jury duty pay: If you give jury duty pay to your employer, you can deduct it.
• Gambling losses: Can be deducted up to the amount of winnings with the proper documentation.
• Military reservist travel expenses: Deductible if traveling 100 miles or more for duty.
• Disaster losses: Only deductible for federally declared disasters. Max deduction is limited to the lesser of the adjusted property basis or decrease in fair market value.

Final Take

No two tax situations are the same — but nearly everyone qualifies for some type of deduction, whether it’s the standard deduction or specific credits like capital gains or the child tax credit. To make sure you’re taking advantage of all the applicable deductions, focus on three key steps:

• Track your expenses throughout the year.
• Stay familiar with IRS deduction rules.
• Consult with a CPA or use tax software to help you claim every deduction you’re eligible for.

John Csiszar, Caitlyn Moorhead, Brooke Barley, Daria Uhlig, Elizabeth Constantineau and Melanie Grafil contributed to the reporting for this article. 

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