Tax Tips: Deductions and Credits for Big Savings

With tax season fast approaching, taxpayers have less than 80 days left to file their taxes. Deductions and credits can help taxpayers reduce the amount they owe or increase their refunds. According to a report by The Hill on February 4, 2023, deductions can reduce income before determining the taxes owed, while credits can cut taxes or increase refunds.

Self-employed individuals can take advantage of deductions for expenses related to driving, registration, servicing, oil changes, gas, and tire maintenance. Medical and dental expenses can be deducted if they exceed 7.5% of adjusted gross income, while teachers can deduct up to $250 for classroom materials.

There are also roughly a dozen tax breaks related to education, such as a deduction for student loan interest, and two education-related credits: the American Opportunity Credit and the Lifetime Learning Credit. The Earned Income Tax Credit is often overlooked and aims to help low- to moderate-income workers who meet multiple qualifications.

Qualified adoption expenses can make taxpayers eligible for a tax credit and exclusion from income for employer-provided adoption assistance. Additionally, electric vehicle owners who buy a qualifying vehicle in 2022 or 2023 may be eligible for a tax credit of up to $7,500.

Taxpayers who do not qualify for any of these tax breaks should check for credits and deductions from their state, which may offer enhanced earned income credits or other localized tax breaks.

This year’s tax filing deadline is April 18. Tax expert Mark Steber suggests that small tax benefits can add up to significant savings over time by reducing overall tax liability.