Do you dread income tax time every year? Us too.
But there are some things that can make the tax filing process a little easier to swallow–tax refunds, credits, and deductions.
Tax savings opportunities
From advantages for solo tax filers to charitable donations, the tax code offers an array of ways to lower your final tax bill.
When you’re ready to file your federal tax return, watch for these key tax benefits:
Family tax savings
The child tax credit is worth up to $2,000 per eligible child and is refundable for taxpayers with an earned income of up to $200,000 (single filers) or $400,000 (joint filers).
Parents who work or attend school and pay for childcare may qualify for the child and dependent care credit. The maximum amount of expenses used to calculate the credit is $3,000 per qualifying dependent or $6,000 for two or more qualifying dependents under the age of 13. The maximum credit is $1,050 for one child and $2,100 for two or more.
The earned income credit is for working taxpayers with low to moderate income. The refundable credit amount is based on filing status, the number of qualifying children, and income level.
Families with three or more qualifying children could qualify for up to $6,935.
College and education tax savings
Paying off student loans? You may be able to deduct up to $2,500 in interest paid during 2022.
In August 2022, it was announced that many borrowers could get up to $10,000 of their federal student loans forgiven. Normally, student loan forgiveness is taxable at the federal level, but 2021’s American Rescue Plan suspended that until 2025. Only a few states will tax the canceled debt. As of Dec. 14, 2022, the forgiveness has been blocked by the courts, and they are no longer accepting applications. Existing applications will be held until a decision is made.
The American Opportunity Tax Credit (AOTC) is worth up to $2,500 per student for post-secondary tuition, fees, and course materials. You can also claim the lifetime learning credit (LLC) for tuition and related expenses at eligible institutions after the first four years of post-secondary education expenses..
Contributing to a Coverdell Education Savings Account? You can exempt a maximum of $2,000 per student in annual contributions.
Homeowners tax savings
Homeowners can use the mortgage interest deduction to deduct up to $750,000 on the mortgage interest paid as a single filer or married couple filing jointly, or $375,000 on the mortgage interest paid if you’re married but filing separately.
The property tax deduction allows a married couple filing jointly to deduct up to $10,000, or $5,000 if single or married filing separately.
The home office deduction allows people who operate a business to deduct office expenses. This deduction is an amount based on the percentage of their home used for operating the business.
Employees tax savings
Grade K-12 educators can deduct $300 in out-of-pocket expenses for classroom supplies.
You may be able to exempt employer-provided mass transit and parking benefits from your gross income.
If you itemize and have paid for work-related education, there’s a deduction for your costs paid minus any employer-reimbursed amount.
There are hundreds more tax benefits that are up for grabs on this year’s federal returns due April 18.
Gather all your tax forms (W-2, 1099, 1098, etc.), receipts, and a copy of last year’s return first. Use a checklist to help determine what info you’ll need.
Photo credit: Images_of_Money via photopin cc
More to explore:
What is the Earned Income Tax Credit?
Is there any benefit to filing my return early?
The Tax Benefits of Contributing to an IRA
7 FAQs about the Earned Income Tax Credit
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