The IRS is now accepting tax returns. What credits and deductions can you make?
If you’re looking to lighten your tax bill this year, here’s what you should know about tax credits and deductions you can make when filing your 2023 return.
The IRS began accepting returns on Monday.
Tax returns — and any owed tax — are due April 15, 2024.
What’s the difference between a tax credit and a deduction?
While tax credits don’t affect your tax rate, they can reduce your overall bill, according to the IRS. If you have a $1,000 tax credit, your bill will be lower by that amount.
If you don’t owe anything, certain refundable credits could give you money back anyway, according to the IRS.
Tax deductions lower how much of your income is taxable. For example, if you have a $1,000 deduction and you’re in the 22% bracket, you’ll save $220.
To find out if you’re eligible for a certain tax credit or deduction, you can answer questions in your tax filing software, talk to a tax professional or use the Interactive Tax Assistant on the IRS website.
What deductions can you take?
Most people can take the standard deduction. It’s adjusted for inflation each year and varies according to your filing status as well as whether you’re blind, 65 or older or someone else can claim you as a dependent, according to the IRS.
It’s not available for everyone, though.
For instance, you can’t take the standard deduction if you are married and filing separately but your spouse itemizes deductions. And you can’t take it if you itemize deductions.
The standard deduction for 2023 is $13,850 if you are single or married filing separately. It’s $27,700 for married couples filing jointly or a qualifying surviving spouse, and $20,800 for a head of household.
You can save money by deducting your expenses and losses individually if those are more than the standard deduction.
There are deductions for work, education, health care and investments.
Whether you itemize or take the standard deduction, you can deduct the following. Please note that this is not an exhaustive list:
Work-related education expenses for some military service members, government employees, self-employed people and people with disabilities
Moving expenses for military service members
If you itemize, you can deduct the following:
Losses from disasters and theft
Medical and dental expenses over 7.5% of your adjusted gross income
What tax credits can you take?
These are the tax credits you could qualify for. Again, note that this is not an exhaustive list.
Family and dependent credits:
Child tax credit
Child and dependent care credit
Earned income tax credit
Education credits
Adoption credit
Clean vehicle credits:
Clean vehicle tax credits
New clean vehicles bought 2023 or later
New clean vehicles bought 2022 or earlier
Used clean vehicles
Income and savings credits
Saver’s credit (retirement savings contributions credit)
Foreign tax credit
Excess Social Security and Railroad Retirement Tax Act tax withheld
Credit for tax on undistributed capital gain
Credit for prior year minimum tax
Homeowner credits
Residential energy credits
Home energy tax credits
Energy efficient home improvement credit
Residential clean energy credit
Health care credits
Premium tax credit
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