Psychoeducational assessment involves collecting, organizing, and interpreting a large amount of data from various sources. Drawing upon psychological and medical literature, we review two main approaches to clinical reasoning (deductive and inductive) and how they synergistically guide diagnostic decision-making. In addition, we discuss how the use of both mental shortcuts (i.e., heuristics) and cognitive biases, which we collectively refer to as thinking errors, can lead to errors in judgment when analyzing data. In particular, we highlight where and how common thinking errors may interfere with school psychologists' reasoning throughout the assessment process. Last, we make suggestions on how to reduce errors in judgment and improve clinical reasoning skills by focusing on training, supported clinical practice, and personal strategies.