Our tax code is filled with ways to reduce your tax bill—but it also contains a few traps that can lead to unexpected tax obligations. Understanding where these surprises can appear is the first step in planning ahead.

Here are some of the more common tax situations that catch people off guard.

Home Office Tax Surprise
If you claim a home office deduction, you may end up paying taxes when you sell your home.

Homeowners who meet the ownership and use requirements can exclude up to $250,000 (single filers) or $500,000 (married couples) of profit from the sale of their primary home. But if you’ve used part of your home exclusively for business, you may have to pay taxes on a portion of the gain.

For example, if your detached home office makes up 5% of your total property, then 5% of your profit from the sale may be taxable.

Even more surprising, if you claimed depreciation for your home office—even if it was inside your main home—that portion must be recaptured and taxed when you sell the property. This rule catches many home-based business owners off guard.

Tip: If your office is in a detached structure, consider moving it into your home before the year of sale to potentially reduce taxable gain.

Kids Getting Older Tax Surprise
Your children may be wonderful tax deductions—until they age out of them.

One of the biggest benefits is the Child Tax Credit, worth up to $2,000 per qualifying child under age 17. But once your child turns 17, that credit disappears, even if they’re still living at home.

For example, if your child turns 17 in 2025, you will not be eligible for the credit on your 2025 return filed in 2026—resulting in a potential $2,000 increase in your tax bill.

Other credits and deductions can phase out as children grow older too, so review your eligibility annually.

Limited Losses Tax Surprise
Selling investments at a loss can help reduce taxes—but only up to a point.

Let’s say you sold one asset at a $5,000 loss. If you have another asset with a $5,000 gain, the two cancel out. But if you don’t have gains to offset, your deduction is limited.

The IRS only allows you to deduct $3,000 of capital losses per year ($1,500 if married filing separately). The remaining losses carry forward to future tax years—but not immediately.

This can be a surprise if you’re expecting a larger deduction. If you’re facing significant losses, coordinate with gains whenever possible to maximize your tax benefit in the current year.

Relying Too Heavily on Last Year’s Tax Return
It’s common to use your prior year’s tax return as a starting point for planning. But if your financial situation changes and you don’t adjust your plan accordingly, you could face an unpleasant surprise.

Changes in income, deductions, credits, or tax laws may result in a different tax bill than expected. Don’t assume next year’s taxes will mirror the past—make adjustments as your circumstances evolve.

Avoiding the Unexpected

Many tax surprises are avoidable with the right planning and awareness. Whether it’s aging children, investment losses, or a potential home sale, being proactive can save you from costly mistakes.

Need help with your 2025 tax strategy?
Schedule a tax planning session today to prepare for the road ahead—and steer clear of these common pitfalls.