By Steve Seals
Tax season can be a stressful time, but it’s also a perfect opportunity to get some of your hard-earned money back. While many taxpayers are familiar with standard deductions, there are a number of frequently overlooked tax deductions that can significantly lower your tax obligation.
Today I’m highlighting these hidden gems, offering useful advice and practical strategies to help you optimize deductions and keep more of your income.
Tax Deductions vs. Tax Credits
Put simply, tax deductions are expenses you can remove from your gross income to lessen your taxable income. With the right tax deductions, you could potentially shift into a lower tax bracket.
Tax credits, on the other hand, lower your total tax liability once it has been calculated. Credits are determined by a number of criteria, including income and expenses. Your tax bill is lowered by the same amount for each credit dollar.
While lower-income families may earn more from credits, wealthy, high-income taxpayers may gain more from deductions. Shrewd taxpayers utilize both.
State Sales Tax Deductions
State sales taxes are one of the more overlooked tax breaks. Given how drastically different state tax regulations are from one another, it’s easy to understand how they can be overlooked.
In order to directly lower state taxable income, states with income taxes usually provide a variety of deductions that mirror or complement federal deductions. Examples of these deductions include those for charitable contributions, mortgage interest, and specific medical costs.
States without income taxes, on the other hand, do not provide income tax deductions. Instead, sales taxes, property taxes, and excise taxes are their main sources of income.
Residents of states without income taxes may still gain from federal deductions, such as the SALT deduction, which allows the deduction of property taxes regardless of state income tax status.
Individual and Home-Based Tax Deductions and Credits
Life and home are typically the focal points of many of the most effective tax-saving opportunities. Let’s explore some of the tax deductions that are often overlooked.
Mortgage Interest Deduction
Homeowners who itemize their deductions are still able to claim up to $750,000 in mortgage interest deductions as of the 2025 tax year. Keep in mind that the Tax Cuts and Jobs Act (TCJA) imposed the $750,000 cap on deductible mortgage debt, which is set to return to the $1 million cap after 2025.
Renewable Energy Credits
Certain expenses can be deducted by homeowners who convert to renewable energy sources. Installing HVAC, water heaters, or solar panels may qualify you for up to 30% of the installation costs. If your new electric car satisfies IRS requirements, you can also be eligible for a non-refundable credit (credit amounts range from $3,750 to $7,500).
Saver’s Credit
Low-to-medium-income individuals can make contributions to IRAs, 401(k), 403(b), and some other retirement programs with the help of the saver’s credit. The credit ranges from 10% to 50% of a maximum of $2,000 per person.
Charitable Contributions
If you itemize your deductions or make charitable contributions using specific authorized methods, you might be able to deduct the total from your taxable income.
Education Deductions
The IRS offers the following learning tax credits to support ongoing education:
American Opportunity Tax Credits
The first $2,000 spent by students (as well as 25% of the subsequent $2,000) can be claimed for authorized educational costs such as books, tuition, and school fees.
Lifetime Learning Credit
The lifetime learning credit helps post-graduates continue their education. They can claim 20% of the first $10,000 spent on expenses, up to a maximum of $2,000.
Student Loan Interest
For the 2025 tax year, eligible taxpayers can deduct up to $2,500 of student loan interest paid, subject to income limitations.
Healthcare and Medical Deductions
You may be eligible for the following medical and prescription expense reimbursements:
Medical Expense Deductions
You could be eligible to have some medical costs deducted from your taxable income if you itemize deductions. To qualify, you have to spend more than 7.5% of your adjusted growth revenue.
HSA Contribution Deductions
Contributions to a health savings account (HSA) that you have opened may be tax-deductible.
Consult a Professional
Understanding and utilizing these frequently overlooked tax deductions can help you navigate tax season with more confidence and financial savvy.
At Seals Financial Planning & Investments, we craft personalized financial plans that meticulously align with your unique retirement goals, allowing a clear path to your desired future. And our dedicated team is here to guide you every step of the way.
Please give us a call at (859) 230-3476 if you would like to schedule a time to meet.
About Richard Stephen (Steve) Seals
Steve Seals is owner and independent Registered Investment Advisor Representative at Seals Financial Planning & Investments VI, LLC, a financial planning services firm based in Lexington, KY. As an independent Registered Investment Advisor Representative with about two decades of experience in the investment and insurance industries, Steve’s firm is founded on getting to know each client personally, allowing him to provide sound financial advice throughout their career and into retirement. With the mission of guiding clients on the path of success, Steve is fueled by his commitment to excellence and goes the extra mile to make sure clients are fully satisfied. He believes in maintaining a positive mindset, creating partnerships with a purpose, and always striving for significant outcomes.
Born in Jenkins, Kentucky, Steve grew up with a love for basketball and serving his community. After high school, he served nine years in the United States Marine Corps, then earned a bachelor’s degree in accounting. He was eventually able to put his degree and desire to help others to work as a fiduciary financial planner. Prior to founding his own firm in 2014, Steve learned from working with Edward Jones, US Bank, University of Kentucky Federal Credit Union, and CUSO Financial. He also received his Security Series 63 and 65/66 through Keystone Financial Group, LLC, and holds various life, health, and variable insurance licenses.
Steve and his wife, Angie, have three daughters (Lauren, Peyton, and Ashton) and two grandsons (Kenyon and Kai). Steve holds a private pilot’s license, and the family enjoys sports, spending time at the lake, and traveling. To learn more about Steve, connect with him on LinkedIn.
