Tax Deductions and Credits That Could Save You Big

Tax season is truly in full swing. Tax deductions and credits are there to help people, so why not take the help? It might seem like a headache having to go through a long list of possible deductions, but it's really not so bad. I've gathered some information directly from the IRS to help you save this tax season. So, let's get into the dollars and cents.

Before we get into the savings, let's look at how credits and deductions work. According to the IRS, "You can claim credits and deductions when you file your tax return to lower your tax. Make sure you get all the credits and deductions you qualify for."

The definition of a credit, according to the IRS, is "an amount you subtract from the tax you owe. This can lower your tax payment or increase your refund." They note that some credits are refundable. That means "they can give you money back even if you don't owe any tax." If you want to claim credits, you must answer questions in your tax filing software. Or, if you're doing taxes the old-fashioned way, you'll have to fill out a form and attach it.

The definition of a deduction, according to the IRS, is "an amount you subtract from your income when you file so you don’t pay tax on it. By lowering your income, deductions lower your tax." In order to do this, you have to have documents to show expenses or losses you want to deduct. You can do this via tax software or, if you're filing a paper return, your deductions go on Form 1040 and you may need to attach extra forms.

Now, the fun part. Read on for tax deductions and credits that could save you cash this season. Here's hoping that Uncle Sam treats you well.

The standard deduction for 2023 is $13,850 for single or married filing separately; $27,700 for married couples filing jointly or qualifying surviving spouse; and $20,800 for head of household. "If you're married filing separately, you can't take the standard deduction if your spouse itemizes. You must both choose the same method," the IRS says.

To find the standard deduction if you're over 65 or blind, go here. To find the standard deduction if you're a dependent on someone else's tax return, go here.

According to the IRS, you can deduct these expenses whether you take the standard deduction or itemize:

Alimony payments
Business use of your car
Business use of your home
Money you put in an IRA
Money you put in health savings accounts
Penalties on early withdrawals from savings
Student loan interest
Teacher expenses
For some military, government, self-employed and people with disabilities: work-related education expenses
For military servicemembers: moving expenses

According to the IRS, you can deduct these expenses if you itemize:

Bad debts
Canceled debt on home
Capital losses
Donations to charity
Gains from sale of your home
Gambling losses
Home mortgage interest
Income, sales, real estate and personal property taxes
Losses from disasters and theft
Medical and dental expenses over 7.5% of your adjusted gross income
Miscellaneous itemized deductions
Opportunity zone investment

Tax season can be a confusing time. There are lots of bits and piece that you have to put together. That said, the IRS has a very helpful page with frequently asked questions. Find the list of questions and answers here. As always, it's also a good idea to get a professional to help with any questions.