Tax season in 2025 brings new rules, tighter enforcement, and plenty of opportunities to trip up if you’re not careful. For Americans filing individual returns, avoiding these common pitfalls can save you thousands in penalties, interest, or lost refunds. Below are the top five mistakes taxpayers make—and how to steer clear of them.
1. Missing the New EV & Energy Credit Deadlines
The Inflation Reduction Act continues to offer generous clean energy incentives, but the rules are stricter in 2025. Many taxpayers purchase electric vehicles or install solar panels expecting full credits, only to be denied because they miss key eligibility requirements or deadlines. For example, the used EV credit is now capped at $4,000, and only vehicles with specific battery sourcing qualify. Dealers must submit Form 8936 at the point of sale to transfer the credit instantly; otherwise, you wait months—or lose it entirely.
To avoid this mistake, verify your vehicle’s eligibility using the IRS online tool at irs.gov/ev before buying. Complete any qualifying purchase by December 31, 2025, and ensure your dealer handles the credit transfer at checkout. Acting early locks in savings and prevents painful surprises when you file.
2. Forgetting to Report Cryptocurrency Transactions
The IRS now receives 1099 forms from major exchanges for transactions over $600, making underreporting nearly impossible to hide. However, many taxpayers still forget to declare income from decentralized exchanges, staking rewards, NFT sales, or wallet-to-wallet transfers. Even small gains—like $50 in staking rewards—must be reported. Failure to do so triggers automated notices and potential audits.
The solution is simple: use crypto tax software like Koinly or CoinTracker to track every transaction and generate Form 8949 automatically. Treat all crypto activity as taxable events, regardless of whether you converted to cash. Start organizing your wallet history now—even if you’ve lost access to an old seed phrase, reconstruct your cost basis using available records.
3. Messing Up the Home Office Deduction
With hybrid work now standard for millions of Americans, the home office deduction remains a frequent audit target. Taxpayers often claim spaces used for both work and personal activities—like a corner of the living room—or fail to prorate utility expenses correctly. The IRS requires the space to be used regularly and exclusively for business, and W-2 employees generally cannot claim it if their employer provides an office.
Self-employed individuals should either use the simplified method ($5 per square foot, up to 300 sq ft for a $1,500 max) or track actual expenses with detailed records. Take photos of your dedicated workspace and measure the square footage accurately. If in doubt, stick to the simplified method—it’s audit-resistant and requires no receipts.
4. Ignoring State Tax Nexus for Remote Workers
Remote work has blurred state tax lines, and 2025 brings aggressive enforcement from high-tax states. If you live in a low-tax state like Florida but work remotely for a company based in California, New York, or New Jersey, you may owe state income tax where your employer is located—thanks to “convenience of the employer” rules. Many filers submit only a federal return and later face surprise bills plus penalties.
Protect yourself by logging your work locations daily. Use tax software that supports multi-state filing, and review your employer’s state nexus. If you worked 30+ days in a high-tax state—even remotely—you likely have a filing obligation there.
5. Waiting Until the Last Minute to Gather Deductions
The standard deduction rises to $15,000 for single filers and $30,000 for married couples filing jointly in 2025, but itemizers who procrastinate miss valuable write-offs. Contributions to HSAs (up to $4,300 for individuals), traditional IRAs, or SEP-IRAs can still be made after year-end but before the filing deadline—yet many forget. Rushing in April also leads to math errors and overlooked credits.
Set a reminder for February 1 to begin gathering documents. Maximize deductible contributions before their respective deadlines: HSA by December 31, 2025, and IRA by April 15, 2026. Use the IRS withholding estimator early in the year to adjust your W-4 and avoid underpayment penalties.
The Tax Benefits of Avoiding These Mistakes
Steering clear of these five errors does more than prevent penalties—it unlocks powerful tax benefits that put real money back in your pocket. A properly claimed EV credit delivers an instant tax benefit of up to $7,500 at purchase. Accurate crypto reporting avoids underpayment penalties (up to 20% of the tax owed) while preserving your full refund.
