Top 10 Income Tax Credits and Deductions Every Professional Must Know for 2025

Tax season is rolling in hotter than a summer in Vegas, and for CPAs, enrolled agents, and tax professionals, it’s game time. The IRS has released new adjustments for 2025, and some tax breaks have seen serious shake-ups. Whether it’s tax credits slashing liability dollar-for-dollar or deductions trimming taxable income, staying ahead of these changes is key. Here’s your ultimate cheat sheet to the most crucial tax credits and deductions that could make or break your clients' returns this year.

Income Tax Credits That Pack a Punch

Tax credits directly reduce the amount of taxes owed, often leading to a bigger refund or lowering tax liability dollar-for-dollar.

Earned Income Tax Credit (EITC)

The EITC remains a game-changer for low-income earners. In 2025, the max credit for families with three or more kids jumps to $8,046 (up from $7,830 in 2024). But watch out—investment income must stay under $11,950 to qualify.

Professional Tip: Many eligible taxpayers miss out on EITC simply because they don’t file. Encourage clients to file even if they owe nothing, it could mean a bigger refund in their pocket.

Child Tax Credit (CTC)

The CTC remains at $2,000 per child, with up to $1,700 refundable. For someone to be eligible for this credit, their modified adjusted gross income (MAGI) must be under $400,000 if they file jointly with their spouse or $200,000 for any other person filing.

Professional Tip: If clients are just over the income limit, explore deductions that can lower their adjusted gross income (AGI) to keep them eligible.

Child and Dependent Care Credit

This credit helps working parents cover childcare costs, covering up to 35% of $3,000 in expenses ($6,000 for two or more dependents).

Professional Tip: Summer camps and babysitting costs count as eligible expenses; clients often miss these!

American Opportunity Tax Credit (AOTC)

For college-bound clients, the AOTC offers up to $2,500 in tuition and book expenses. Plus, 40% is refundable meaning up to $1,000 back even if no taxes are owed.

Professional Tip: Clients need a 1098-T tuition statement from their school to qualify, double-check their paperwork!

Lifetime Learning Credit (LLC)

Not just for college kids! The LLC offers a 20% credit on up to $10,000 in tuition and fees, maxing out at $2,000 per return.

Professional Tip: LLC covers job training & certifications, great for self-employed professionals investing in skills.

Adoption Credit

Adoption costs add up, but the adoption credit rises to $17,280 per child for 2025. Income limits start phasing out at $259,190.

Professional Tip: This credit carries forward up to five years if a client doesn’t use it all at once.

Premium Tax Credit

For clients using Healthcare.gov or state exchanges, this credit lowers monthly premiums based on income and household size.

Professional Tip: Clients may qualify for retroactive tax credits if their income drops mid-year.

Fuel Tax Credit

Clients using fuel for off-highway business (like farming or construction) may qualify for a refundable fuel tax credit.

Professional Tip: This credit applies only to business-related fuel use—not commuting!

Deductions That Lower Taxable Income

Tax deductions reduce taxable income, lowering the overall amount of income subject to taxation and potentially reducing the final tax bill.

Standard Deduction

The IRS bumped up standard deductions again:

• Single filers: $15,000 (up from $14,600 in 2024)
• Married filing jointly: $30,000 (up from $29,200)
• Head of household: $22,500 (up from $21,900)

Professional Tip: Itemizing only makes sense if total deductions exceed these limits—run the numbers before deciding.

SALT Deduction

The State and Local Tax (SALT) deduction lets homeowners deduct state income, sales, and property taxes but the cap remains at $10,000 ($5,000 for single filers).

Professional Tip: Clients in high-tax states like California, New York, or New Jersey should look for additional deductions, like mortgage interest or medical expenses, to maximize savings.

What’s on the Horizon?

The tax landscape is shifting, and significant changes could be happening. The IRS has adjusted standard deductions, while AMT exemption levels and estate tax exclusions are rising, with the estate tax exclusion increasing from $13.61M in 2024 to $13.99M in 2025. Many provisions of the Trump-era Tax Cuts and Jobs Act (TCJA) are set to expire, including the QBI deduction, lower individual tax rates, and the cap on SALT deductions. Meanwhile, 401(k) contributions have increased to $23,500, with a higher catch-up contribution of $11,250 for ages 60-63 under SECURE 2.0. Additionally, Trump has floated the idea of eliminating taxes on Social Security benefits, but experts warn this could accelerate Social Security insolvency. Tax professionals should help clients navigate these uncertainties by adjusting their financial strategies, maximizing retirement contributions, making strategic gifts before estate tax changes, or deciding when to realize income.

What’s Next?

The 2025 tax season will be complex, with inflation adjustments, phase-outs, and credit limits shifting. To maximize refunds (or minimize what clients owe), staying ahead of these updates is crucial. Double-check refundable credits as many clients miss out on money they’re owed, run tax planning scenarios, especially for clients close to income limits and encourage proactive adjustments like 401(k) contributions to lower taxable income. Tax laws change, but a trusted tax pro never goes out of style. Stay informed and inspired, subscribe to MYCPE ONE Insights for expert insights and actionable tips delivered right to your inbox!