As you gear up for tax season, it’s important to know what’s available to you in terms of both tax credits and deductions. (Remember: a tax deduction reduces the income you’re taxed on and a tax credit cuts your tax bill directly.) These can make a big difference when it comes to your end of year tax bill. Read on to learn more about some of the most popular tax breaks.
- Medical Expenses: You can deduct unreimbursed medical expenses that are more than 7.5% of your adjusted gross income. The full list of qualifying expenses can be found in IRS Publication 502.
- Earned Income Tax Credit: If your adjusted gross income is less than $57,000, you may qualify for this credit. Your marital status and number of dependents will factor in as well.
- Mortgage Interest Deduction: Qualifying homeowners can have their taxable income reduced based on the amount of mortgage interest paid. It’s one way to make home ownership more affordable.
- Child Tax Credit : The Child Tax Credit pays up to $3.6K for every child under the age of 17, depending on your income. You’ll get the full credit if you make up to $150,000 (couple) or $112,500 (single-parent family).
- Child and Dependent Care Tax Credit: If you have a child 13 years old or younger and pay for child care while you are working or looking for work, you qualify for this one. The amount varies, but can be no more than $3,000 for one qualifying individual and no more than $6,000 for two or more qualifying individuals.
- Head of Household Status : If you are single and have a child and file as a head of household, you’re eligible for a lower tax rate than if you file as single. Talk to a tax professional about updating your status.
For Students & Teachers
- American Opportunity Tax Credit: This credit lets you claim the first $2K you spent on tuition, books, equipment and school fees (not including living expenses or transportation), plus 25% of the next $2K for a total of $2,500.
- Lifetime Learning Credit: With this credit you can claim 20% of the first $10K you paid towards tuition and feeds, for a maximum of $2,000. You can also claim books and supplies needed for coursework.
- Student Loan Interest Deduction: You can deduct up to $2,500 if you paid interest on your student loans.
- Educator Expenses: Teachers and other eligible educators can deduct up to $250 spent on classroom supplies.