Tax season is well underway and U.S. taxpayers should be aware of various credits and deductibles that can reduce their overall tax bill.
More than 40 million returns have already been filed this season, but if you are one of the tens of millions yet to do so with the Internal Revenue Service (IRS), you have until April 15.
There are numerous tax credits and other tax reduction options for American taxpayers, some of which can result in the IRS paying you a refund.
Newsweek has gathered everything you need to know ahead of filing for the 2025 filing season.
Tax Credits
There are numerous tax credits that can be claimed by taxpayers.
Low to middle income and child tax credits
- Earned Income Tax Credit: A refundable credit for those who earned less than $66,819 (if Married Filing Jointly) or $59,899 (if filing as Single, Qualifying Surviving Spouse or Head of Household) in tax year 2024—although there are other requirements as well. If you qualify, you can claim it even if you don’t normally file taxes or aren’t required to file.
- Child Tax Credit: Offers a credit of up to $2,000 for each qualifying child under age 17, but how much you get is subject to income phase-out thresholds. A portion of the credit may be refundable, meaning it can increase your refund even if you don’t owe any tax.
- Child and Dependent Care Credit: Provides a credit for a percentage of expenses paid for the care of qualifying individuals, such as children under 13 or a spouse or dependent who is incapable of self-care, to enable the taxpayer to work or look for work. The percentage of expenses that can be claimed and the maximum amount of expenses eligible for the credit may vary based on income.
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Education Credits
- American Opportunity Tax Credit (AOTC): Offers a credit for qualified education expenses paid for an eligible student for the first four years of higher education. The maximum annual credit is $2,500 per eligible student. It is partially refundable; you can receive up to $1,000 even if you owe no tax.
- Lifetime Learning Credit (LLC): Provides a credit for qualified tuition and related expenses paid for eligible students enrolled in eligible educational institutions. Available for all years of postsecondary education, including courses to acquire or improve job skills. The maximum credit is $2,000 per tax return. Non-refundable; it can reduce your tax to zero but not below zero.
Retirement and savings credits
- Saver’s Credit (Retirement Savings Contributions Credit): Encourages low- and moderate-income taxpayers to make contributions to retirement plans, such as a 401(k) or an IRA, by offering a non-refundable credit. The credit amount is a percentage of the contributions, up to a maximum amount, and varies based on filing status and income.
Standard Deductions
The standard deduction is a fixed dollar amount that lowers taxable income. It includes the basic standard deduction plus any additional deductions for age and/or blindness. Typically, the IRS adjusts this deduction annually for inflation. The amount varies based on filing status, whether the taxpayer is 65 or older and/or blind, and whether they can be claimed as a dependent by another taxpayer.
The standard deduction for 2024 is:
- $14,600 for single or married filing separately
- $29,200 for married couples filing jointly or qualifying surviving spouse
- $21,900 for head of household
There are also a range of deductibles you can make whether using the standard amount or itemizing.
- 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
- Work-related education expenses for some military, government, self-employed and people with disabilities.
- Moving expenses, again only for military service members.
Some taxpayers choose to itemize their deductions if their allowable itemized deductions total is greater than their standard deduction. Other taxpayers are required itemize deductions because they aren’t entitled to use the standard deduction. If you itemize, you can deduct the following expenses:
- 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 percent of your adjusted gross income
- Miscellaneous itemized deductions
- Opportunity zone investment
Source: Tax breaks and credits to be aware of ahead of filing returns
