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Maximizing Your Tax Refund: Deductions and Credits You Might Be Missing

Written by:
Director of Education and Corporate Communications

Tax season is here, but it doesn’t have to be daunting. It’s a chance to potentially lower your tax bill, boost your refund, or boost your refund, which can be a valuable component of your overall financial planning strategy. We’ll explore deductions and credits you might be overlooking and how to claim them.

Understand your tax situation

You need to understand your tax situation to maximize your tax benefits. Key factors to consider include your income level, filing status (single, married, filing jointly, etc.), and whether to itemize deductions or take the standard deduction.

Tax deductions

Tax deductions reduce your taxable income. There are two primary options for deductions: the standard or itemized deductions.

The standard deduction is a fixed amount the IRS sets that reduces taxable income. The amount you qualify for depends on your filing status, age, dependency status, and whether you are blind. Here are the standard deductions for tax year 2024 (taxes due 2025):

Filing status2024 standard deduction
Single; Married filing separately$14,600.
Married filing jointly; Surviving spouse$29,200.
Head of household$21,900.

Itemizing allows you to deduct specific expenses, such as charitable contributions, medical expenses, and mortgage interest. If your total itemized deductions exceed the standard deduction amount, itemizing will generally result in a larger tax refund.

Some of the deductions listed below require you to itemize them, so it’s wise to carefully review your unique situation and explore all available options to maximize your tax refund.

Medical expenses

You may be able to deduct unreimbursed medical and dental expenses. This includes a wide range of expenses, including doctor visits, prescriptions, specialized medical equipment, transportation for medical and dental care ($0.21 per mile for 2024), costs for long-term care, and insurance premiums if you are self-employed. However, if your insurance company reimburses you for any of these expenses, that amount cannot be deducted.

To claim the deduction, you must itemize your deductions on Schedule A of your tax return instead of taking the standard deduction. Importantly, you can only deduct the portion of your medical expenses that exceeds 7.5% of your Adjusted Gross Income (AGI). For example, if your AGI is $50,000, you can only deduct medical expenses exceeding $3,750 ($50,000 x 0.075). Keep all your receipts for eligible expenses and maintain detailed records.

Charitable contributions

Charitable donations can also provide tax benefits if you itemize deductions. Deduct eligible contributions of cash, your personal car for charitable work, or goods to qualified organizations. Remember to obtain a receipt for any donation exceeding $250 to ensure it can be claimed on your taxes. The IRS requires you to provide a qualified appraisal of the items (or group of items) if you claim a deduction over $500.

Add your charitable contributions to Schedule A of your federal income tax return to claim this deduction. Make sure you are only reporting donations to qualified organizations (the IRS’s Tax Exempt Organization Search tool will let you verify the status of an organization), and keep records of your donations, including receipts and appraisals.

Student loan interest deduction

You can deduct up to $2,500 in interest paid during the tax year for those repaying student loans. This can be on any qualified student loan you took out for yourself, a spouse, or someone dependent when you took out the loan.

You can either file with the standard deduction or itemize your deductions to claim this deduction. You’ll need Form 1098-E (which reports the interest you paid and is typically provided by your lender if you paid more than $600 in interest). However, you can’t be claimed as a dependent on another person’s tax return to claim this deduction, and your Modified Adjusted Gross Income (MAGI) must fall below $90,00 if filing single or head of household, or $180,00 if filing married filing jointly.

State and local tax deductions

The state and local tax (SALT) deduction lets you deduct certain state and local taxes from your federal income tax return. This includes property taxes, income, and sales taxes. The maximum SALT deduction is $10,000 (or $5,000 if married and filing separately).

To claim this deduction, you must itemize all your eligible deductions on Schedule A of your federal income tax return (Form 1040).

Homeowner deductions

Homeowners can potentially claim several tax deductions, including mortgage interest on both primary and second homes, discount points paid to lower interest rates, interest on home equity loans (subject to limitations), property taxes on primary and secondary residences, and certain home improvements (for example those that enhance accessibility for medical reasons).

If you use a portion of your home exclusively and regularly for business purposes, you may be eligible to deduct related home office expenses. When selling your home, you can deduct expenses such as real estate agent commissions, legal, advertising, administrative, escrow, and inspection fees. Notably, if you resided in your home for at least two of the past five years, you may qualify for a significant capital gains tax exclusion on any profit from the sale.

To claim these homeowner deductions, you must choose to itemize your deductions on Schedule A of your tax return instead of taking the standard deduction.

Tax credits

Tax credits directly reduce the amount of tax you owe and provide a dollar-for-dollar reduction in your tax bill. Since tax credits are not deductions, it doesn’t matter if you file with the standard or itemized deductions.

Child Tax Credit

The Child Tax Credit (CTC) can provide up to $2,000 per qualifying child. A significant portion of this credit is refundable, meaning you can receive the credit even if you don’t owe any income tax.

You’re eligible for the full CTC if your Modified Adjusted Gross Income (MAGI) is below $400,000 for married couples filing jointly or below $200,000 for other filers. If your income exceeds these limits, the credit amount gradually decreases by $50 for every $1,000 above the threshold until it phases out completely.

To claim this credit, you’ll need to complete Schedule 8812. This form will guide you through the necessary information and calculations.

Child and Dependent Care Credit

The Child and Dependent Care Credit (CDCC) provides a tax break for eligible expenses related to childcare for children under 13 and the care of dependents, such as those with a disability. Some expenses include daycare, preschool, pre- and after-school care, day camp, and a dependent care center. You can generally claim up to 35% of qualifying expenses, with limits of $3,000 for one dependent and $6,000 for two or more.

To claim this credit, you must have earned income throughout the year and paid for the care expenses so that you could either work or look for employment. You will need to fill out Form 2441 and Schedule 3.

Energy Efficient Home Improvement Tax Credit

This tax credit lets homeowners who purchase qualifying home upgrades (like energy-efficient windows, doors, insulation, or heat pumps) recoup up to 30% of the cost of those investments.

Improvements must have been made to claim this credit to your primary residence. You must fill out and attach Form 5695 to your tax return.

Saver’s Credit

The saver’s credit helps eligible taxpayers offset the cost of saving for retirement. It’s worth up to $1,000 ($2,000 if married and filing jointly) for mid- and low-income taxpayers who contribute to a retirement account like a 401(k) or IRA. The exact amount of the credit depends on your filing status and income.

To claim this credit, include Form 8880 with your tax return. The contributions must be new money (i.e., rollovers from an existing account don’t count), and your AGI must be below the income limits for your filing status: Married filing jointly: $76,500, Head of household: $57,375, all other filing statuses: $38,250.

Research to file with confidence

When filing your taxes, carefully research the credits and deductions you may be eligible for. This list provides a starting point, but it’s not exhaustive. Carefully compare the standard deduction to itemized deductions to determine which option will result in the greatest tax savings for your specific circumstances.

Tax software can simplify claiming deductions and credits by guiding you through the necessary forms and schedules. Consider consulting with a qualified tax professional for personalized advice and to ensure you’re maximizing your tax benefits.

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