How to Pay Less Taxes

1. Claim All Eligible Deductions

Most people claim the standard deduction, but you may save money by itemizing and claiming all of the deductions for which you're eligible. What can you deduct? Here are a few larger deductions to consider:

• State and local taxes: The limit on the state and local tax (sometimes referred to as SALT) deduction is set to increase temporarily starting in 2025, from $10,000 to $40,000. SALT taxes include property tax and sales taxes, so this deduction can be substantial.
• Mortgage interest: Qualifying mortgage interest is tax deductible if you itemize. Note that any portion of your mortgage payment that goes to pay principal doesn't count.
• Charitable gifts: Donations you make to IRS-qualified charities are deductible from your taxable income.
• Medical expenses: Any unreimbursed medical and dental expenses that exceed 7.5% of your adjusted gross income are deductible.

After comparing your itemized deductions versus the standard deduction, you may still find that the standard deduction provides the most savings. If that's the case, stick with it. Claiming the standard deduction saves you the trouble of ferreting out and documenting your deductions: Your standard deduction is automatic.

2. Watch for New Deductions in 2025

Brand new deductions may be available for the 2025 tax year as a result of recent legislation. These deductions are available whether you itemize your deductions or claim the standard deduction. As of late September 2025, final details were still being ironed out on how to claim these deductions, so stay tuned.

• Deduct up to $25,000 in tips. Employees and self-employed people may deduct up to $25,000 in qualifying tip income. The deduction applies to occupations the IRS lists as "customarily and regularly receiving tips."
• Deduct up to $12,500 in overtime pay. Overtime compensation that exceeds your regular rate of pay (for example, the additional "half" when you're paid time and a half) may be deducted up to $12,500 for single filers and $25,000 for married couples filing jointly. This deduction begins phasing out at a modified gross income of $150,000 ($300,000 if filing jointly).

• Deduct up to $10,000 of new car interest. Among the requirements:

  • Vehicles must be new, with final assembly in the U.S.
  • Qualifying vehicles include cars, minivans, vans, SUVs, pick-up trucks and motorcycles, with a gross vehicle weight rating of less than 14,000 pounds.
  • Vehicles must be financed with a loan that is secured by a lien; leases don't qualify.

  The deduction phases out starting at $100,000 in modified adjusted gross income ($200,000 for joint filers).

• Deduct an additional $6,000 if you're 65 or older. Seniors ages 65 and older can take an additional $6,000 exemption ($12,000 if you're married and both spouses qualify) in 2025. This deduction begins phasing out at a modified adjusted gross income of $75,000, or $150,000 if filing jointly.

3. Maximize Retirement Contributions

Reduce your taxable income by contributing to a traditional 401(k) retirement plan or individual retirement account (IRA). With a traditional IRA or 401(k), your contributions are excludable from your taxable income, lowering the amount of income you'll be taxed on.

• Max out your 401(k). Contribute up to $23,500 to a 401(k), or up to $31,000 if you're age 50 or older. In 2025, you can make a super-contribution of $11,250 (for a total of $34,750) if you're 60 to 63.
• Add an IRA for additional savings. Contribute an additional $7,000 to an IRA. You can contribute $8,000 if you're 50 or older.

Your IRA tax deduction may be reduced or eliminated if you contribute to a 401(k) at work and make more than $79,000 as a single taxpayer, or $126,000 if you're married filing jointly.

Learn more: 401(k) vs. IRA Contribution Limits

Tax Savings With a Roth IRA

Roth IRA contributions aren't tax deductible, but you may still see tax savings over time. Any capital gains, dividends or interest you earn in a Roth IRA are tax-free. You'll need to mind income restrictions, contribution limits and early withdrawal restrictions to avoid penalties.

4. Use Tax-Advantaged Accounts

Tax-advantaged accounts may help you maximize your savings and minimize your tax bill by allowing tax-deductible contributions, tax-deferred or tax-free earnings, or tax-free withdrawals. Two types of tax-advantaged accounts to consider:

Health Savings Accounts

If you have an eligible high-deductible health plan, contributing to a health savings account (HSA) offers multiple tax benefits. You can deduct HSA contributions from your taxable income, up to $4,300 for single taxpayers and $8,550 for families in 2025. Money saved in an HSA earns interest tax-free, and your qualified withdrawals are untaxed as long as you use the money to pay for qualified medical or dental expenses.

529 College Savings Plans

Using a 529 educational savings plan won't save you money on your current taxes: Contributions aren't deductible. However, your money can grow tax-free within the account, and you won't be taxed on your withdrawals, gains or interest when you use the money to pay for eligible education expenses.

5. Look for Tax Credits

Tax credits lower your tax bill directly, dollar-for-dollar. That makes tax credits especially valuable for reducing your tax bill. Here are nine common tax credits to consider:

• Child tax credit: Claim up to $2,200 per qualifying child (under age 17 at the end of the year). This credit begins to phase out when you earn $200,000 per year ($400,000 if married filing jointly).
• Credit for other dependents: Receive a tax credit of up to $500 for children 18 and older and other qualifying dependents, such as elderly parents you support. This credit also begins phasing out when your income reaches $200,000 (or $400,000 if filing jointly).
• Education credits: The American opportunity tax credit (AOTC) and lifetime learning credit (LLC) can help you pay for qualifying education expenses for yourself or your kids. The AOTC provides up to $2,500 in partially refundable credits; the LLC provides up to $2,000.
• Earned income tax credit: Low- and moderate-income taxpayers may be entitled to tax credits of up to $8,046, based on income and number of qualifying dependents.
• Child and dependent care credit: Receive tax credits of up to $3,000 for one qualifying dependent or $6,000 for two or more qualifying dependents when you incur eligible expenses for their care.
• Retirement saver's credit: Tax credits of up to $1,000 ($2,000 for joint filers) act as matching dollars for eligible 401(k), IRA or ABLE account contributions. You must meet income requirements to qualify.
• Electric vehicle tax credit: This is the last year to claim this tax credit. If you purchased a qualifying electric vehicle before September 30, 2025, you may be able to claim up to $7,500 in tax credits.
• Premium tax credit: You may be eligible for tax credits to help cover the cost of your health insurance premiums if you meet income requirements and purchase health insurance through a government exchange.
• Residential clean energy credit: Receive tax credits for up to 30% of your costs for installing clean energy improvements like solar panels, wind turbines or geothermal heat pumps. Improvements must meet IRS qualifications to be eligible for the credit.

6. Don't Forget Business Deductions

Self-employed people can deduct legitimate business expenses—including home office costs, business mileage, license fees, insurance and more—from their business income. This is separate from the personal deductions you may take for mortgage interest or SALT; you can (and should) take business deductions even if you claim the standard deduction.

7. Practice Tax-Loss Harvesting

Harvesting tax losses means deliberately selling assets at a loss to reduce your capital gains (and capital gains taxes) for the year. In addition to paying taxes on your earned income, you pay capital gains taxes on any money you make selling stocks or other investments. Short-term capital gains (on assets held for less than a year) are taxed as ordinary income; long-term capital gains are taxed at 0%, 15% or 20%, depending on your adjusted gross income.

Selling at a loss can be tricky, so you may want to consult with your financial advisor before proceeding with this strategy.

Learn more: Can You Deduct a Capital Loss on Your Taxes?

8. Review Your Withholding

If you get hit with a big tax bill at filing time, it could be because you didn't withhold enough tax throughout the year. Adjusting your paycheck withholding won't lower your tax liability, but it could make your next tax day less painful by ensuring you've contributed enough to cover what you owe.

Tip: If you expect to owe $1,000 or more in taxes because you have self-employment income, investment income or taxable spousal support, consider making quarterly estimated tax payments. Quarterly estimates help you avoid late payment penalties and spread your tax payments out, so you don't wind up owing a large lump sum at tax time.

Frequently Asked Questions

The Bottom Line

Thinking through the many deductions, credits, contributions and tax strategies available to you takes a bit of time and effort. But, if you want to keep your tax bill to a minimum, this extra effort can pay off. As a final tip, try to get an early start on tax preparation, whether you work with a tax advisor or use tax preparation software. Extra time allows you to take a careful look at your year's finances and uncover potential savings you can claim on your tax return.