We know that filing your taxes for 2025 can feel overwhelming, especially with new laws, credits, and deduction limits changing each year. Understanding which tax deductions and tax credits you qualify for can significantly lower your tax bill when you file in 2026.
Here we break down the most important deductions and credits for individuals and small business owners, and how they can impact your federal tax return. For a full overview of new legislation affecting deductions, you can also review our Tax Changes for 2025 and One Big Beautiful Bill overview page.
What’s the Difference Between Tax Deductions and Tax Credits?
Understanding this difference is key to maximizing your tax savings for 2025.
Tax Deductions Lower Your Taxable Income
A deduction reduces the amount of income that is subject to tax, which means you pay tax on a smaller portion of your earnings.
Common deductions can include:
- Standard deduction based on filing status
- Student loan interest
- IRA contributions
- Health savings account (HSA) contributions
- Business expenses for self-employed individuals
Tax Credits Reduce Your Actual Tax Bill
A tax credit directly reduces how much tax you owe. Some credits are refundable, meaning you may receive money back even if you owe little or no tax.
Examples of credits include:
Standard Deductions for the 2025 Tax Year
Most taxpayers take the standard deduction instead of itemizing.
For the 2025 tax year, the IRS standard deduction amounts are:
- $15,750 for single or married filing separately
- $31,500 for married filing jointly or qualifying surviving spouse
- $23,625 for head of household
If your deductible expenses exceed these amounts, itemizing may reduce your tax bill further.
Itemized Deductions You May Qualify For
If you choose to itemize, you may be able to deduct qualifying expenses such as:
- Mortgage interest
- Charitable contributions
- Medical and dental expenses above 7.5% of adjusted gross income
- State and local taxes (subject to SALT limits)
- Casualty or theft losses
Itemizing is most beneficial for taxpayers with higher medical costs, large charitable donations, or significant mortgage interest.
Major Tax Credits for Individuals in 2025
Tax credits can provide some of the biggest savings on your return.
Child Tax Credit (CTC)
- Up to $2,000 per qualifying child
- Up to $1,700 refundable depending on income and tax liability
Earned Income Tax Credit (EITC)
Available to low- and moderate-income workers.
Maximum credits for 2025:
- $649 with no children
- $4,328 with one child
- $7,152 with two children
- $8,046 with three or more children
Education Credits
You may qualify for:
- American Opportunity Credit (for undergraduate education)
- Lifetime Learning Credit (for continued education or career training)
Eligibility depends on income, tuition paid, and enrollment status.
Clean Energy and Electric Vehicle Tax Credits
Taxpayers who invest in energy-efficient upgrades may qualify for credits such as:
- Residential clean energy credit (solar panels, battery storage)
- Energy-efficient home improvement credit
- Federal electric vehicle tax credit (eligibility varies by vehicle and income)
Some credits have income limits and vehicle eligibility requirements that change each year. Proper documentation is required.
Deductions and Credits for Small Business Owners and Self-Employed Workers
If you are self-employed or operate a pass-through business, additional tax benefits may apply.
Qualified Business Income (QBI) Deduction
- Allows up to 20% deduction on qualified business income
- Phases out for income above $197,300 (single) or $394,600 (joint) in 2025
Common Business Deductions
You may be able to deduct:
- Home office expenses
- Business vehicle use
- Equipment and software
- Professional services
- Marketing and advertising
Accurate bookkeeping is essential to properly claim these deductions.
How Tax Law Changes May Affect Your Deductions and Credits
Some deductions and credits are impacted by federal legislation, including updates under the One Big Beautiful Bill and annual IRS inflation adjustments.
This can affect:
- SALT deduction limits
- Clean energy incentives
- Business tax credits
- Income thresholds for credits
To understand how legislation may impact your return, review our One Big Beautiful Bill tax breakdown and 2025 tax changes overview.
How Boxelder Consulting Can Help You Maximize Tax Savings
Tax deductions and credits can dramatically change your final tax bill, but only if they are applied correctly.
At Boxelder Consulting, our CPAs and tax advisors help individuals and business owners:
- Identify every deduction and credit you qualify for
- Plan ahead for income and investment decisions
- Avoid filing errors that trigger audits or delays
- Optimize long-term tax strategies, not just annual returns
Get Help With Your 2025 Tax Planning
Preparing early gives you more control over your financial outcomes.
If you want guidance on how to maximize your tax deductions and tax credits for the 2025 tax year, our team is ready to help.
Request a tax planning consultation with Boxelder Consulting to start building a smarter tax strategy before you file in 2026.
