23 Tax Deductions Most Individuals Don’t Know About

Tax deductions allow you to subtract expenses from your income. By writing off eligible expenses on your tax return, you can legally reduce your taxable income and pay less income tax overall.

The student loan interest deduction was the first deduction I could remember discussing with my parents while planning for college. Since then, I have made it a habit to check for possible deductions at any stage of my life—from medical expenses to launching a business. Here are some tax deductions that most people don’t know about but might apply to you.

1. Home Office Telephone Expenses

Most people know about the home office deduction, which allows eligible individuals to deduct expenses related to a home office used exclusively for business. However, only some know about the deductions from home office telephone expenses.

If you’re self-employed, you can also deduct expenses related to business calls from a home office. You can deduct only the percentage of your phone bill used for business calls, not the part used for personal calls.

2. Adoption Expenses Deduction

The Internal Revenue Service (IRS) allows taxpayers to deduct specific expenses related to adopting a child. They defined reasonable and necessary Qualified Adoption Expenses (QAE), which include court costs, adoption fees, and attorney fees. To claim the deduction, taxpayers must have adopted a child under 18 or with special needs.

3. Business Subscription and Publication Deduction

Business subscription and publication deduction allow business owners to deduct the cost of subscriptions to professional journals, magazines, newspapers, and online publications related to their industry.

Under U.S. tax law, these expenses are considered ordinary and necessary for conducting business. Entrepreneurs could qualify for the deduction if their subscriptions directly relate to business operations or professional development.

4. Tax Deductions for Jury Duty Pay

In some states, employers are required by law to continue paying employees who missed work due to jury service. However, the employers would then require these employees to turn over any payments they received from the court.

If you’re the employee in this scenario and want to claim this deduction, you must first claim the jury pay as income, then take a deduction for the pay you gave your employer. Use the IRS Interactive Tax Assistant (ITA) to check if your jury duty payment is taxable.

5. Depreciation

Depreciation lets businesses stretch out tax deductions on big purchases over the full life of the item. Instead of deducting the full cost of something simultaneously, you deduct part each year. That is for big-ticket items a business buys to use for a long time, such as machinery or pick-up trucks.

To determine depreciation, you divide the item’s total cost by the “useful lifetime of the asset” or by how many years it will be used.

So if a machine costs $10,000 and will be used for 5 years for your business, the depreciation deduction each year is $10,000/5 years = $2,000. In this example, instead of deducting the full $10,000 on your business taxes in the first year, you can deduct $2,000 yearly for 5 years. That $2,000 per year is the depreciation.

6. Rental Property Expenses Deduction

Residential or commercial rental property owners can deduct expenses associated with operating the rental to reduce taxable income. Eligible deductions include mortgage interest, property taxes, repairs, maintenance, property management fees, utilities, and depreciation on the rental property. Maintain proper documentation in case you need to include proof of expenses.

7. Gambling Loss Deduction

Gambling losses are a tax deduction if you itemize them and keep records of winnings and losses. This kind of deduction is limited to the amount of gambling income reported, so any gambling winnings must also be reported on your tax return. You must be able to show losses with documentation such as receipts, tickets, or statements.

8. Unreimbursed Medical Expense Deduction

To help offset high medical costs, taxpayers can deduct medical expenses that make up more than 7.5% of their adjusted gross income. Things like doctor visits, prescriptions, hospital bills, and others on the IRS Schedule A Deductible Medical Expenses qualify. Ensure you keep proper documentation like receipts and insurance statements since you’d need to itemize expenses to claim this deduction.

9. IRA Contributions Deduction

Taxpayers can deduct contributions to traditional Individual Retirement Accounts (IRAs) from their taxable income. As long as their deductions stay under a certain limit set by the IRS each year. Contributions must be made before the tax filing deadline and within specified income limits. The deduction reduces taxable income, potentially lowering the taxpayer’s tax liability.

10. Worthless Investment Securities Deduction

Taxpayers can claim a deduction for securities—like stocks, bonds, and mutual funds—that have become worthless during the tax year. This type of deduction is subject to certain limitations and rules the IRS sets. For example, the securities must be completely worthless to qualify, with no potential to recover any value.

Taxpayers can deduct the loss as a capital loss on their tax return, which can offset capital gains and reduce taxable income.

11. Job Search Deduction

With certain stipulations, you can deduct job search expenses in some states, like California. For example, you cannot be a first-time job seeker, the job must be in the same field as your last employment, and you must itemize your deductions.

12. Mortgage Points Deduction

Points paid on a new mortgage are fully deductible if you meet certain tax law requirements. This type of deduction allows homeowners to deduct the points paid to secure a mortgage when buying or refinancing a home.

Points are prepaid interest paid at closing to lower the interest rate on the loan. The taxpayer’s primary residence must secure the loan to qualify for the deduction. The points must also be within the range of typical charges in the area.

13. Tax Preparation Fee Deduction for Self-Employed

In the past, all taxpayers could deduct tax preparation fees. However, this changed after Congress passed the Tax Cuts and Jobs Act. Under this new law, only business owners and self-employed individuals are eligible for this deduction.

Self-employed and business owners can deduct expenses incurred for professional tax preparation services, software, and other costs associated with tax preparation.

14. Work Clothes and Uniforms Deduction

Self-employed individuals and businesses can deduct the cost of work-related clothing and uniforms. The clothes or uniforms must be required for their job and not suitable for everyday wear to qualify for this deduction. Regular clothing, even if used for work, is not deductible.

15. State Sales Tax Deduction

Taxpayers can use the sales tax deduction to reduce their state and local sales taxes paid during the year instead of deducting state and local income taxes.

This deduction is particularly beneficial for taxpayers in states with no income tax or taxpayers who made large purchases during the tax year. Taxpayers can choose to deduct their actual sales tax paid or use the optional sales tax calculator provided by the IRS.

16. Tax Deduction for Conservation Easement Contributions

Taxpayers who donate a qualified conservation easement can claim a charitable deduction on their tax return. A conservation easement is a legal agreement between a landowner and an organization, such as a land trust or government agency. This agreement puts permanent restrictions on the land, protecting the conservation value and preserving the land’s natural state. The deduction is based on the easement’s appraised value, but strict requirements must be met.

17. Hobby Loss Deduction

Hobby loss deduction is a tax rule allowing people who run business activities to claim losses on their taxes. However, they can’t claim these losses if the activity is just a hobby.

Taxpayers can claim deductions exceeding income if an activity qualifies as a business. However, the IRS scrutinizes such claims to ensure activities are bona fide businesses and the hobbies are conducted to generate a profit (even if they fail to do so). Proof of real effort to make money is required to claim business deductions beyond income.

18. Business Meals and Entertainment Deduction

The business meals and entertainment deduction allows businesses to deduct expenses related to meals and entertainment.

The expenses must be directly related to business conduct or are associated with a substantial and bona fide business discussion to claim this deduction. The deduction typically covers 50% of the cost of meals and entertainment incurred for business purposes, subject to certain requirements set by the IRS.

19. Educator Expense Deduction

If you’re an eligible educator, you can deduct up to $300 of unreimbursed expenses for education materials, classroom supplies, and professional development courses.

If two eligible educators are married and filing jointly, they can deduct up to $600. However, each educator can only claim $300 or less. Eligible educators include teachers, instructors, counselors, principals, or aides who work in elementary or secondary schools for at least 900 hours during the school year.

20. Charitable Mileage Deduction

According to the IRS, any mileage incurred with your vehicle performing services for charitable organizations is eligible for a charity mileage deduction.

The standard IRS mileage rate for charitable driving—set by statute and unchanged since 1998—is $0.14 per mile. This deduction is valid as long as you have yet to be reimbursed by the charity.

21. Charitable Car Donation Deduction

Taxpayers can subtract the fair market value of donated vehicles from their taxable income. The vehicle must be donated to qualified charitable organizations to claim this deduction.

Taxpayers must also itemize their deductions and provide donation documentation, such as a receipt from the charity. The deduction amount depends on the vehicle’s condition and the charity’s use of the donation.

22. Legal and Other Professional Fee Deduction

The IRS allows businesses to deduct fees paid for legal, accounting, and other professional services. The business owners must prove that the fees are used for “ordinary and necessary” expenses. To claim the deduction, taxpayers must itemize their deductions and provide documentation of the fees paid to eligible professionals.

23. Business Startup Expenses Deduction

The IRS permits entrepreneurs to deduct certain costs when starting a new business. For the first year of its operations, businesses can deduct up to $5,000 in startup costs.

A major requirement for this deduction is that the business actively engages in a trade or business. In addition, startup expenses—such as legal fees, market research, advertising, and employee training— must be incurred before the business begins operating.