The Most Popular Deductions and Credits
Explore popular tax deductions and credits to cut your tax burden. Deductions lower taxable income, while credits reduce taxes owed, leading to significant savings.
Top 10 Tax Deductions and Credits
Understanding the most common deductions and credits can help you plan your finances more effectively and lower your tax liability. Here are the top 10:
| Deduction/Credit | Maximum Benefit | Eligibility Criteria |
| Mortgage Interest | Interest on $750,000 | Homeowners with mortgage debt |
| SALT Deduction | $10,000 | Taxpayers paying state/local taxes |
| Charitable Contributions | Up to 60% of AGI | Donations to qualified charities |
| Retirement Contributions | $7,000 ($8,000 if 50+) | Contributions to traditional IRAs |
| Student Loan Interest | $2,500 | Paid interest on qualified student loans |
| Medical Expenses | Over 7.5% of AGI | Unreimbursed medical/dental expenses |
| Child Tax Credit | $2,000 per child | Qualifying children under age 17 |
| Earned Income Credit | Varies | Low to moderate-income workers |
| Education Credits | Up to $2,500 | Qualified education expenses |
| Saver’s Credit | Up to $1,000 | Contributions to retirement accounts |
Additional Tax Planning Tips
- Maximize Retirement Savings: Contribute to a 401(k) or IRA to lower your taxable income. Additionally, if you’re over 50, take advantage of “catch-up” contributions.
- Leverage Health Savings Accounts (HSAs): Contributions are tax-deductible, and withdrawals for qualified medical expenses are tax-free.
- Utilize Tax-Loss Harvesting: Offset gains with losses by selling underperforming investments to minimize capital gains tax.
FAQs about Popular Deductions and Credits
1. What is the difference between a tax deduction and a tax credit?
A tax deduction lowers your taxable income, reducing your tax based on your bracket. Conversely, a tax credit directly reduces your tax bill. Both can lead to significant savings.
2. How do I know if I qualify for specific deductions and credits?
Eligibility depends on factors like income, filing status, and expenses.
3. Can I claim multiple deductions and credits in the same year?
Yes, provided you meet the criteria for each.
4. How does the Child Tax Credit work?
The Child Tax Credit reduces your tax by up to $2,000 per qualifying child under 17, based on income and the child’s residency status.
5. Are charitable donations tax-deductible?
Yes, if you itemize deductions and donate to qualified charities. Remember to keep records of all donations to support your claims.
6. What are the 2024 retirement contribution limits?
For 2024, you can contribute up to $23,000 to 401(k), 403(b), and most 457 plans, with an additional $7,500 catch-up for those 50 or older. Traditional and Roth IRA limits are $7,000, with an extra $1,000 for those 50+.
7. Can I deduct medical and dental expenses?
Yes, if your unreimbursed medical and dental expenses exceed 7.5% of your Adjusted Gross Income (AGI). Keep detailed records for accuracy.
8. What is the limit for deducting charitable contributions?
You can generally deduct charitable contributions up to 60% of your AGI if you itemize. Note that some contributions may have lower limits.
9. Who qualifies for the Earned Income Tax Credit (EITC)?
The EITC is for low to moderate-income workers. Eligibility depends on income, filing status, and the number of qualifying children.
10. How do education credits like the American Opportunity Credit work?
The American Opportunity Credit offers up to $2,500 per student for the first four years of higher education. The Lifetime Learning Credit provides up to $2,000 per tax return for education expenses.
Our Offerings
Dimov CPA is dedicated to helping New York residents maximize their deductions and credits. Our experts stay updated on the latest tax laws and regulations, providing personalized guidance to ensure you save as much as possible and remain compliant with IRS rules.
