Don't Leave Money on the Table: Commonly Missed Tax Deductions for 2026

Every tax season, thousands of New Haven residents overpay on their taxes simply because they don't know what deductions are available. The average taxpayer misses out on hundreds: sometimes thousands: of dollars in legitimate tax savings.

2026 brings new opportunities to reduce your tax bill, including several deductions that didn't exist in previous years. Whether you're filing as an individual or running a small business, understanding these commonly missed deductions can make a significant difference in your refund.

New Deductions You Need to Know About for 2026!

The tax landscape changed dramatically with recent legislation. Here are the brand-new deductions that most taxpayers don't realize they can claim:

Tip Income Deduction

If you earned tip income in 2025, you can now deduct those earnings as a below-the-line deduction. This applies to restaurant servers, bartenders, delivery drivers, and anyone else who receives tips as part of their compensation. Keep detailed records of all tip income reported to maximize this deduction.

Overtime Pay Deduction

Worked overtime last year? You can now claim overtime pay as a deduction. This is particularly valuable for hourly workers who put in extra hours. Make sure you have pay stubs that clearly separate regular wages from overtime compensation.

Car Loan Interest Deduction

Taxpayers can deduct up to $10,000 in car loan interest payments on loans used to purchase qualified vehicles for personal use. This deduction phases out for those with modified adjusted gross income over $100,000 for single filers or $200,000 for joint filers. If you financed a vehicle purchase in 2025, gather your loan statements showing interest paid.

Enhanced Senior Deduction

If you're age 65 or older, you qualify for an enhanced senior deduction worth approximately $6,000 per eligible taxpayer on top of the standard deduction. This can significantly reduce taxable income for retirees and older workers.

Above-the-Line Deductions Most People Miss

These deductions reduce your adjusted gross income regardless of whether you take the standard or itemized deduction. That makes them particularly valuable:

Business Use of Your Home

Work from home? Even if you're an employee with a home office setup, you may qualify for this deduction. Self-employed individuals can deduct a portion of rent, utilities, internet, and maintenance costs based on the square footage used exclusively for business.

Business Use of Your Car

Track mileage for business-related driving. The standard mileage rate allows you to deduct a set amount per mile driven for business purposes. Keep a detailed log with dates, destinations, and business purposes for each trip.

IRA and HSA Contributions

Contributions to traditional IRAs and Health Savings Accounts reduce your taxable income. For 2025, you can contribute up to $7,000 to an IRA ($8,000 if you're 50 or older) and deduct the full amount if you meet income requirements. HSA contributions are capped at $4,300 for individual coverage or $8,550 for family coverage.

Student Loan Interest

You can deduct up to $2,500 in student loan interest paid during the year. This applies even if your parents are making the payments on your behalf. You don't need to itemize to claim this deduction.

Educator Expenses

Teachers and educators can deduct up to $300 in unreimbursed classroom expenses. This includes supplies, books, equipment, and technology used in the classroom. Keep all receipts for materials purchased with your own money.

Self-Employed Health Insurance Premiums

If you're self-employed and pay for your own health insurance, you can deduct 100% of the premiums paid for yourself, your spouse, and your dependents. This deduction can save thousands for freelancers and small business owners.

Business Owner and Freelancer Deductions You're Probably Missing

Small business owners and independent contractors often leave significant deductions unclaimed:

Qualified Business Income (QBI) Deduction

The QBI deduction is now permanent, allowing business owners to deduct up to 20% of qualified business income. Those earning below $203,000 (single) or $406,000 (married filing jointly) receive the full deduction with no limitations. This applies to sole proprietors, partnerships, S corporations, and some trusts and estates.

Calculate your QBI carefully: this single deduction can reduce your tax bill by thousands.

Freelancer and Independent Contractor Costs

If you hire freelancers or independent contractors, those costs are fully deductible as business expenses. This includes payments to virtual assistants, graphic designers, consultants, and any other contract workers. Keep Form 1099-NEC documentation for all contractors paid $600 or more.

Professional Development and Education

Courses, seminars, conferences, and certifications related to your current business are deductible. This includes online courses, professional memberships, and industry publications. The key requirement: the education must maintain or improve skills required in your current business.

Technology and Software

Computers, tablets, smartphones, software subscriptions, and cloud storage used for business purposes can be deducted. Under Section 179, you may be able to deduct the full purchase price of qualifying equipment in the year it's placed in service rather than depreciating it over several years.

Itemized Deduction Opportunities for 2026

If your total itemized deductions exceed the standard deduction ($15,000 for single filers, $30,000 for married filing jointly in 2026), you should itemize:

State and Local Taxes (SALT) Deduction Increase

The SALT deduction cap increased from $10,000 to $40,000 for 2025 and 2026. This is particularly valuable for New Haven residents facing Connecticut's state income tax and local property taxes. Add up your state income taxes paid and property taxes: many taxpayers will now benefit from itemizing.

Medical and Dental Expenses

You can deduct medical and dental expenses that exceed 7.5% of your adjusted gross income. This includes insurance premiums (if not deducted elsewhere), prescription medications, doctor visits, dental work, eye care, medical equipment, and mileage to medical appointments. Track all healthcare spending throughout the year.

Casualty and Theft Losses

Losses from natural disasters or theft may be deductible if they exceed 10% of your adjusted gross income. Document losses with photos, police reports, and insurance claim information.

How Jose's Tax Service Helps You Claim Every Deduction

At Jose's Tax Service, we specialize in finding deductions that other preparers miss. Our team stays current on tax law changes and knows exactly what New Haven taxpayers can claim.

We review your entire financial situation: income sources, expenses, investments, and life changes: to identify every applicable deduction. Our clients consistently receive larger refunds because we take the time to ask the right questions and examine all documentation carefully.

Don't leave money on the table this tax season. Schedule your appointment at Jose's Tax Service and let us maximize your refund through careful attention to deductions you might not even know exist.

Action Steps:

• Gather documentation for all income sources, including tip income and overtime pay
• Collect receipts for potential deductions (medical expenses, business expenses, educator costs)
• Compile records of car loan interest, student loan interest, and IRA/HSA contributions
• Calculate business use percentages for home office and vehicle
• Review state and local tax payments to determine if itemizing makes sense

The deadline for filing 2025 tax returns is April 15, 2026. The sooner you start organizing your records, the more deductions we can identify and claim on your behalf.