By When tax season rolls around, one of the best ways to minimize what you owe—or maximize your refund—is by taking advantage of deductions and credits. While they may seem similar, deductions reduce your taxable income, and credits reduce the actual tax you owe. Understanding how each works can make a big difference in your bottom line.
Common Tax Deductions
1. Mortgage Interest Deduction
Homeowners who itemize their deductions can deduct the interest paid on their mortgage. This is often one of the largest deductions for individuals and families.
2. Student Loan Interest Deduction
If you’ve been paying interest on qualified student loans, you may be able to deduct up to $2,500, even if you don’t itemize.
3. Charitable Contributions
Donations to qualifying charities are tax-deductible. Remember to keep receipts or acknowledgment letters for proof.
4. Medical and Dental Expenses
If your medical expenses exceed a certain percentage of your adjusted gross income, the portion above that threshold may be deductible.
5. State and Local Taxes (SALT)
You can deduct state and local property taxes, plus either income or sales taxes, subject to certain limits.
Popular Tax Credits
1. Child Tax Credit
Families with dependent children may qualify for the Child Tax Credit, which provides a dollar-for-dollar reduction in tax liability.
2. Earned Income Tax Credit (EITC)
This credit is designed for low-to-moderate-income earners. It can significantly reduce taxes owed and may result in a refund.
3. Education Credits
The American Opportunity Credit and Lifetime Learning Credit can help offset the cost of higher education expenses.
4. Energy-Efficient Home Improvements
Taxpayers who make qualifying energy-efficient upgrades, like installing solar panels, may be eligible for credits that directly reduce their tax bill.
Why Professional Help Matters
While online software makes filing easier, many people miss out on valuable deductions and credits simply because they don’t know they qualify. Searching for accountants near me for taxes can connect you with professionals who understand the latest laws and can help ensure you’re not leaving money on the table.
Tax deductions and credits can have a significant impact on your finances if you know where to look. From mortgage interest and student loans to child credits and education savings, these opportunities can reduce what you owe and improve your financial outlook. Taking the time to learn about them—or working with a professional—can help you file with confidence and keep more of your hard-earned money.