Tax Credits and Deductions That Are Often Overlooked
Taking advantage of tax credits and deductions is the easiest way to lower your tax bill. However, unless you’re an expert, figuring out which credits and deductions make sense for your situation can feel incredibly stressful. There are options for homeowners, parents, caregivers, students, etc.
Below is a list of commonly overlooked tax credits and deductions that could save you money.
Homeowner
Being a homeowner can be tough on your finances, but the IRS provides a few breaks.
Selling Costs Deduction
When you sell your home for profit, there are a million little things to take care of. So it’s easy to forget that you can deduct many of your expenses. Advertising fees, agent fees, and more are deductible. Remember to keep receipts and log every payment in case the IRS asks for proof.
Energy-Efficient Home Improvement Tax Credit
Did you recently make energy-efficient improvements to your home? You might be eligible for a tax credit of up to $3,200. This credit has no lifetime limit, so you can claim it every year you qualify. However, you will only be able to recoup some of your costs this way. You’re limited to claiming 30% of eligible expenses.
Home Office Deduction
Working from may come with a tax benefit. You can claim the home office deduction if your office is used exclusively and regularly for business purposes.
Parental Credits and Deductions
Childcare costs are notoriously expensive. Here are the tax benefits that could help.
Child Tax Credit
Eligible parents can reduce their tax bill by up to $2,000 per child under 17. Your child must have a valid Social Security number and live with you for at least half the year to qualify.
Dependent Care Credit
If you have children under 13 or dependents with disabilities, you can claim a tax credit for up to 35% of the expenses you pay for their care. You’ll have to use a qualified caregiver and enter their social security or taxpayer-identification numbers on your tax return.
The maximum credit is $3,000 for one person or $6,000 for two or more people.
Education Credits and Deductions
Students can receive specific tax credits.
- American Opportunity Tax Credit: Allows you to claim up to $2,500 per year for your first four years of undergraduate studies. You must be trying to obtain a recognized credential or degree.
- Lifetime Learning Credit: Offers a credit of up to $2,000 for each year of post-secondary education. You can take classes for education’s sake and not pursue a credential or degree.
- Tuition and Fees Deduction: Allows you to deduct up to $4,000 in education expenses if you don’t claim the other two credits. Parents of students are eligible for this deduction.
- Educator Expense Deduction: Spending money on your classroom students? Educators can deduct up to $250 for out-of-pocket expenses related to teaching.
- Student loan interest deduction: Gives you the chance to deduct $2,500 in student loan interest payments from your taxable income.
The Earned Income Tax Credit
The Earned Income Tax Credit (EITC) is a refundable tax credit for low-income families. If you qualify, the EITC can reduce your overall tax bill by thousands. The amount of the credit depends on your specific situation, and you can claim it even if you don’t owe any taxes.
Charitable Contributions Deduction
Giving to a good cause can help reduce your tax bill, too. Donations made to qualified charitable organizations are tax-deductible. This includes money, goods, stock, or property donations. Large donations may require additional paperwork and proof from an independent appraiser.
Itemizing Tax Deductions
Even if you’re eligible for deductions, you may not want to claim them all. You have two choices on your tax return: itemize your deductions or take the standard deduction, which is set at $14,600 for singles in 2024 and $29,200 for couples. Taking the standard deduction is smart if your itemized deductions add up to lower than these amounts. If they don’t, stick with the itemized list.
In addition to the above deductions and credits, there may be others that apply. It’s always a good idea to consult with tax professionals like the Kondler & Associates, CPAs, team. We can help you trim your tax bill to the lowest possible amount. Contact us today for a free consultation.
