Deductions can reduce your taxable income and potentially lower your bill, whereas a credit cuts your tax bill directly. To guide you through the intricacies of the tax landscape, here's a comprehensive overview of the top 20 tax deductions and credits for 2023-2024.
The Child Tax Credit (CTC) is a tax credit for families with children under the age of 17. You must also meet certain income requirements to qualify. With the 2023 Child Tax Credit (2024 tax return), you can receive up to $2,000 per child, of which $1,600 can be refunded.
Intended to cover a portion of day care costs, the CDCC applies to children under 13, spouses, parents unable to care for themselves, or other dependents. Typically, it covers up to 35% of $3,000 of expenses for one dependent or $6,000 for two or more.
The student loan interest deduction allows borrowers to deduct up to $2,500 from their taxable income when they pay interest on their student loans.
The American Opportunity Tax Credit allows you to claim up to $2,500 for the first $2,000 spent on tuition, books, equipment, and school fees (excluding living and transportation costs), with an additional 25% for the next $2,000.
A non-refundable tax break that helps taxpayers cover a certain amount of qualified adoption expenses per child. The 2023 cap is $15,950. This credit is phased out once your modified adjusted gross income (MAGI) is $279,230 or more.
Claim 20% of the first $10,000 you pay in tuition and fees, up to a maximum of $2,000. This credit covers books and supplies required for classes (excluding living and transportation costs).
EITC is a refundable tax credit for low-income taxpayers with or without children. For 2023 (tax filing year 2024), the credit ranges from $600 to $7,430, depending on factors such as the number of children, marital status, and income.
Generally, you can deduct qualified, unreimbursed medical expenses exceeding 7.5% of your adjusted gross income for the tax year.
Itemizers may deduct the value of charitable gifts up to 60% of their adjusted gross income.
A tax credit called the SALT deduction allows you to deduct up to $10,000 ($5,000 if married and filing separately) for a combination of property taxes and state/local income or sales taxes.
Deductible contributions to Health Savings Accounts (HSAs) with tax-free withdrawals for qualified medical expenses.
Reduces federal income tax for qualifying homeowners by the amount of mortgage interest paid.
If you use part of your home regularly and exclusively for business-related activity, you can deduct associated expenses like rent, utilities, repairs, maintenance, and other related expenses.
Freelancers and self-employed individuals can benefit from various tax write-offs.
Earn a credit of 10% to 50% on up to $2,000 ($4,000 if filing jointly) in contributions to an IRA, 401(k), 403(b) or certain other retirement plans. The percentage depends on your filing status and income.
Contribute to a traditional 401(k) directly from your paycheck, with a 2023 limit of $22,500 ($30,000 if 50 or older).
Contributions to a traditional IRA may be deductible. However, how much you can deduct depends on whether you or your spouse have professional retirement savings and how much your income is.
The non-refundable electric vehicle tax credit ranges from $3,750 to $7,500 for the 2023 tax year. Taxpayers can also receive up to $4,000 in credits for used cars. Eligibility depends on a number of rules, including income, vehicle value, and whether the vehicle meets the IRS's Certified Electric Vehicle Manufacturing Guidelines.
The solar tax credit offers up to 30% of the installation cost of solar energy systems.
The energy-efficient home improvement tax credit allows homeowners who purchased qualifying home upgrades, such as energy-efficient windows, doors, and heat pumps, to recoup up to $3,200 on those investments when they file their tax returns.
