It’s tax season, and it’s time to file your tax return. You’ll receive W-2 and 1099 forms by the end of January, which show last year’s income. To lower your tax bill, you can either claim the standard deduction or itemize deductions if it’s higher. Additionally, you can use tax credits or direct income reductions to lower what you owe to the IRS.
Teachers can deduct up to $250 per year for educational materials they buy for their students, while the IRS offers a lifelong learning credit of 20% (up to $2,000 annually) for post-graduate education expenses.
Self-employed workers can deduct the 7.65% employer portion of Social Security taxes, and there is the Earned Income Tax Credit (EITC) for eligible taxpayers with dependents, worth up to $6,728. Charitable donations can also result in tax savings, including expenses like ingredients for a charity bake sale.
Individuals can write off bad debts and mortgage points as tax deductions. Health savings accounts (HAS) are tax-advantaged plans with tax-deductible contributions, tax-deferred earnings, and tax-free withdrawals for qualified distributions.
Americans in states without income tax may take a deduction for sales taxes instead of state income taxes if itemized deductions exceed standard deductions. In some cases, babysitter expenses can also be deductible when seeking work, working, or full-time studying, but documentation is required to prove the expense.