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Most Popular Credits and Deductions

Are you looking for ways on how to reduce the amount of tax you owe? If so, then tax credits are your ideal options. The tax credits reduce your tax liability. On the other hand, tax deductions reduce the amount of your income that is subject to taxes. In short, deductions reduce your taxable income. This article lists the most popular credits and deductions you can claim to reduce your tax liability and taxable income.

Here are some of the most popular credits and deductions:

Saver’s Credit

Do you contribute to an employer-sponsored retirement plan or an individual retirement account such as 401(K) or IRA? If so, you might qualify for the saver’s credit. However, you should not be a full-time student and not less than 18 years old. Besides that, no one should claim you as a dependent in his or her tax return.

In addition, you receive the amount of credit based on your AGI. The AGI for a single filer is $32,000, while that of a married couple filing jointly is $64,000.

The purpose of the saver’s credit is to offer you a higher incentive to save for your retirement.

Child and dependent care credit

The Child and Dependent Care Credit (CDCC) is the best boot for taxpayers with children and other dependents in their households. The maximum credit to claim for one dependent is $3,000, while that of two or more dependents is $6,000. However, you need to show proof of your expenses, which you use to take care of the well-being and protection of the dependent or child. Moreover, you are free to use the credit for care expenses of your child or dependent if the person taking care of the child/ other dependents is not your spouse or dependent.

Earned Income tax credit

The earned income tax credit is an amazing tax break for moderate and low-income taxpayers. If your income is lower, this credit lowers the amount of taxes you file. To qualify for this credit, you must be earning either from a business or as an employee.

Any household that qualifies for earned income tax credit receives a notification from IRS. Nonetheless, you can contact the EITC assistant to check if you are eligible for this credit. The worth of EITC varies based on the filing status of a taxpayer, the number of qualified dependents, and the amount of income. It is refundable and may be noticeable depending on your tax case.

American opportunity tax credit

This tax credit covers the expenses you incur at a qualifying institution during your first four years of your college or higher education. You can qualify for this credit if you have never had a felony drug conviction. Also, this credit is partially refundable, which means you can get a refund even when you fail to overpay your taxes in the entire year.

Nonetheless, you can claim the full credit if your adjusted gross income (AGI) is not more than $80,000 in a year. This means for an annual income that exceeds $80,000; you will get a partial credit.

Residential energy credit

If you an energy-efficient homeowner, you should claim a residential energy credit. This credit includes:

  • Biomass stoves
  • Water heaters
  • Roofs
  • Energy-efficient doors and windows
  • Energy-efficient heating and AC systems
  • Qualified solar water heaters and solar electric property
  • Insulation

Lifetime learning credit

The LLC is for taxpayers aiming to take vocational courses, post-secondary, or post-graduate degree over time. Although the Lifetime Learning Credit (LLC) is not refundable, it is an excellent tax break for continuous education. To claim this deduction, your dependent or spouse should be paying the bill to cater for qualified higher education costs.

Further, the LLC deduction also has some income limits. The income limit for a married couple filing jointly is $136,000. On the other hand, that of a qualifying widow/widower, head of household, or if you are filing single is $68,000. The deduction is up to $2,000.

Adoption tax credit

Adoption of a child is a process with expenses. For this reason, the adoption tax credit offers some benefits for the expenses. The credit covers expenses directly linked to adoption, such as travel expenses, attorney fees, court costs, adoption fees, and others. By 2018, the amount was up to $13,810 per child.

Medical and dental expenses

Although you have insurance, in some cases you have no option but to pay for medical expenses from your pocket. If these expenses are more than 7.5% of your AGI, then you can deduct them for your dependents, your spouse, or yourself. Some of these expenses include:

  • Payments for service animals, guide dogs, wheelchairs, crutches, hearing aids, contact lenses, eyeglasses, and insulin.
  • Acupuncture treatments, residential nursing home care, and hospital care.
  • Fees for non-traditional medical practitioners, mental health professionals, specialists, dentists, and doctors.
  • Treatment for smoking-cessation programs, drug addiction, alcohol, and prescription drugs for nicotine withdrawal.

Child tax credit

This credit does not cater for care expenses. Instead, it is a tax break for parents who incur the costs of having a child. To qualify for the Child Tax Credit (CTC), your child should not be more than 17 years of age and should be on your tax return as a dependent.

For every qualifying child, the CTC saves you a maximum of $2,000. Eligible dependents for this credit include:

  • Adopted child
  • Niece/nephew
  • Your child
  • Foster child
  • Grandchild
  • Stepsibling
  • Stepchild
  • Half-child

Health savings account contribution

Do you have a health savings account? If so, all the contributions you make to your HSA is not subject to the federal income tax. Furthermore, you can claim a tax deduction because of contributing to your HSA.

However, the contribution limits vary based on your age, high-deductible health plan, and eligibility date.

Charitable contribution deductions

Charitable contributions are among the most popular methods to receive a tax deduction. All donations to qualifying charities qualify for deductions. Likewise, your unreimbursed expenses from volunteering are also deductible.

In short, you can claim deductions on all property or money you donate to any qualified organization, as long as you itemize the deductions. Although some instances limit you to 20% or 30% of your AGI, you are free to deduct 50% in most cases.

Student loan interest deduction

One of the most intimidating and expensive things for anyone is repaying back the student loans. Luckily, the student loan interest deduction can give you some break during tax time.

You might request a tax credit if you paid interest on any qualifying student loan for your dependent, spouse, or yourself. Instead of claiming an itemized deduction, you are free to claim the deduction like an adjustment to your income. In return, you will be capable to deduct either the total amount of interest you paid that year or $2,500.

State and Local Taxes Deduction (SALT)

If your state has local or state income tax, you are free to deduct a part of those taxes in your federal return. Likewise, if your state has high sales tax rates or no income tax, you should add up your paid sales tax to ease your tax situation. You can also increase your SALT deduction using state and local property taxes. This credit is up to $10,000 for married filing jointly, and $5,000 for single filing.


For more information related to tax credits that you can claim or if you need an expert’s guidance in filing your tax returns, do contact us at At UBOS, we assure you that we won’t let you down.

If you are looking for ways to lower your tax bill, you should consider claiming the above deductions. However, ensure that you qualify the credit requirements before making a claim.

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