Tax Credits And Deductions That Could Reduce Tax Liabilities This 2023

A tax credit directly reduces tax liabilities, while a deduction reduces an income that could be taxed on. In this article, read and find out the most well-known tax credits and deductions that can reduce tax liabilities this 2023!

Tax Credits and Tax Deductions [Photo: Community Tax]

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Child Tax Credit

According to an article in NerdWallet, the Child Tax Credit (CTC) can provide tax credits of up to $2,000 per eligible child. $1,500 of these tax credits are potentially refundable.

Child and Dependent Care Tax Credit

The Child and Dependent Care Tax Credit is intended to cover a percentage of the expenses made for taking care of a child below 13. A spouse, parent, or other dependents unable to take care of themselves are also eligible. Generally, these tax credits amount to 35% of the $3,000 worth of expenses for one dependent. If there are two or more dependents, the tax credits can reach up to $6,000.

Adoption Credit

The Adoption Credit is intended to cover up to $14,890 worth of adoption costs per child. However, this tax credit starts to gradually decrease at specific income levels. Once the adjusted gross income reaches $263,410 or more, it will completely be discontinued.

Earned Income Tax Credit

The Earned Income Tax Credit (EITC) can provide tax credits worth $560 to $6,935. This depends on how many children there are, the marital status, and how much income is earned.

Charitable Donation Deductions

If the charitable donation deductions are itemized, the value of the charitable donation may be subtracted from the taxable income. The charitable donations may be in cash or property like clothes or a car. According to the Internal Revenue Service (IRS), up to 60% of the charitable donations can generally be deducted from the adjusted gross income.

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