As tax season approaches, every taxpayer, whether you’re a full-time employee, freelancer, or small business owner, shares the same goal: optimize your tax return. But with changing IRS rules, new 2025 thresholds, and countless deductions and credits, it’s easy to miss opportunities.
The good news? With the right mix of credits, deductions, strategic decisions, and professional support, many taxpayers can increase their refund or reduce what they owe. This guide breaks down key strategies in simple terms so you can approach 2025 tax filing with confidence.
Many taxpayers don’t realize that filing status impacts their tax bracket, standard deduction, and eligibility for certain credits. While choosing a filing status is straightforward for many, some individuals must weigh their options for the most beneficial filing status.
Single
Married Filing Jointly
Married Filing Separately
Head of Household (HOH)
The Head of Household Advantage
Unmarried individuals who provide financial support for a qualifying child or relative may be eligible for the Head of Household (HOH) filing status.
For example, a single parent supporting a child may qualify for HOH instead of Single. This offers:
To qualify, you generally must be unmarried, pay more than half of the household expenses, and have a qualifying person live with you for more than half the year.
Strategic Choice for Married Couples
Most married couples file jointly, but "Married Filing Separately" may benefit households with unique circumstances.
For example, significant medical expenses are deductible only when they exceed 7.5% of an individual’s Adjusted Gross Income (AGI). Filing separately could make it easier for one spouse to reach the threshold. But beware, if one spouse chooses to itemize deductions, then the other spouse must also itemize.
If your household situation has changed, such as divorce, remarriage, or supporting a relative, you may be eligible for a more advantageous filing status.
Deductions lower your taxable income, but tax credits reduce your tax bill dollar-for-dollar, making them one of the most powerful tools for increasing your tax refund.
For instance, a $1,000 tax credit saves you $1,000 in taxes, whereas a $1,000 deduction only saves you an amount equal to your tax bracket percentage.
Many taxpayers miss out on credits they’re eligible for. Review your eligibility for these common tax credits:
It is also important to understand the difference between refundable and non-refundable credits. Non-refundable credits can reduce your tax liability to zero, but you will not get any of it back as a refund. In contrast, a refundable credit may be paid out even if your tax liability is zero.
For example:
Deductions lower your taxable income, meaning you’re taxed on a smaller portion of what you earn. You can take the standard deduction or itemize, whichever provides the greater benefit.
The standard deduction is a flat rate deduction based on your filing status. Most taxpayers take the standard deduction, which increases annually with inflation. Itemizing may yield more savings if your deductible expenses exceed the standard deduction.
| Filing Status | Standard Deduction Amount |
| Single | $15,750 |
| Married Filing Jointly | $31,500 |
| Head of Household | $23,625 |
| Married Filing Separately | $15,750 |
Common Itemized Deductions
Mortgage interest, with certain limitations based on the date of acquisition
Charitable contributions, with certain limitations based on the type of property donated
State and local taxes (SALT), now capped at $40,000 under the One Big Beautiful Bill Act (OBBBA).
Tallying these expenses is the only way to know for sure which path saves you more money.
Example
A single filer with:
$9,000 in mortgage interest
$3,000 in cash charitable donations
Total itemized deductions: $14,500
Since the 2025 standard deduction is $15,750, taking the standard deduction saves more.
Senior Bonus Deduction
A new temporary $6,000 senior bonus deduction applies for taxpayers aged 65 years or older for tax years 2025 through 2028. It can be taken in addition to the current additional standard deduction for seniors of up to $2,000 per taxpayer. It can also be taken in addition to itemized deductions. It begins phasing out at:
These adjustments reduce your Adjusted Gross Income (AGI), a key value that determines eligibility for many tax credits. They are especially valuable because they are available whether you itemize or take the standard deduction.
Common above-the-line deductions include:
Lowering your AGI not only reduces your overall tax burden, but it may also unlock credits out of reach due to income limitations.
Self-employed taxpayers can deduct qualified business expenses to reduce their taxable income. The IRS requires these expenses be ordinary (common in your industry) and necessary (helpful and appropriate for business).
These expenses are reported on Schedule C of your tax return, and can meaningfully reduce taxable income for entrepreneurs when properly documented.
Simple filing mistakes are among the fastest ways to lose out on tax savings or delay your refund.
Gig workers are especially prone to missing income forms like 1099s since platforms often issue multiple forms.
Optimizing your tax return starts before you file. If too little tax is withheld during the year, you will likely owe money. If too much is withheld, you will likely receive a refund, but only because you overpaid the IRS throughout the year.
The goal of strategic tax planning is to get as close to a zero balance as possible. Use the IRS Withholding Estimator to adjust your W-4 when:
Once you’ve handled the basics—credits, deductions, filing status—you can explore advanced strategies for long-term tax optimization.
If you hold investments with losses in taxable accounts, selling them can offset capital gains from appreciated assets. Be mindful of the wash sale rule, which prevents you from repurchasing the same (or substantially identical security) within 30 days of the sale and still claiming the loss.
Where you hold your investments (i.e. asset location) may affect how much tax you pay. Moving assets into tax-advantaged accounts can reduce your current or future tax burden while boosting long-term growth.
Key accounts include:
Understanding which account(s) best fits your goals can help both your current return and long-term strategy.
A popular year-end tax strategy, shifting income or deductions to the most advantageous year can create meaningful savings.
Examples:
Strategic timing can help smooth your tax burden and optimize your refund potential depending on your situation.
The U.S. tax code is thousands of pages, not including IRS guidance, court rulings, and legislative updates. With only a basic understanding, most filers unintentionally:
A qualified tax professional doesn’t just file your return; they help build a year-round tax strategy that aligns with your financial goals, income, and investments.
Optimizing your tax return in 2025 means using every tool available: credits, deductions, long-term investment planning, and professional support. With a mindful approach, you can uncover substantial savings and build confidence for future tax years.
Contact an LTax team member today for personalized advice to ensure you aren’t leaving money on the table.
LEGAL OR TAX: The information herein is not legal, such as trust or estate planning, advice, or tax advice. Any such information is provided for illustrative purposes only and must not be relied upon without the benefit of the advice of your lawyer and/or tax professional. Lido specifically disclaims any liability from any reliance on such information. Lido is not a legal service provider or tax professional and does not offer legal or tax advice. Should you desire to obtain tax or legal services or advice, you must enter into your own, independent engagement agreement with a licensed attorney or tax professional.