Don’t Overlook These 6 Tax Deductions

March 24, 2022 by Spectrum Credit Union

Last Updated: April 5, 2024

Tax season is upon us, and the federal income tax filing deadline of April 15 for most filers is quickly approaching. As you're sorting through your paperwork and crunching numbers, it's essential to consider every opportunity to trim your tax bill. Maximizing deductions and taking advantage of tax credits can significantly reduce your taxable income and potentially lead to a larger refund or lower tax liability.

Here are six often-overlooked tax tips for 2023 that could save you money.

Deduction for state and local taxes

One commonly overlooked deduction is the state and local tax (SALT) deduction. This allows you to deduct up to $10,000 ($5,000 if married filing separately) for a combination of property taxes and either state and local income taxes or sales taxes. By taking advantage of the SALT deduction, you can reduce your taxable income, potentially leading to a lower tax bill. Keep in mind, you’ll need to itemize to take advantage of this deduction; you can’t use it in conjunction with the standard deduction.

Lifetime learning credit

The lifetime learning credit is another valuable tax-saving opportunity. This credit allows you to claim 20% of the first $10,000 you paid toward tuition and fees, for a maximum credit of $2,000. Unlike some other education-related tax benefits, the lifetime learning credit covers expenses such as books or supplies needed for coursework, making it a versatile option for those pursuing further education.

Medical expenses deduction

While medical expenses can add up quickly, they can also provide an opportunity for tax savings. You can deduct qualified, unreimbursed medical expenses that exceed 7.5% of your adjusted gross income for the tax year. This deduction can include various medical costs, from doctor's visits and prescription medications to certain home health care expenses. By keeping track of your medical expenditures, you may be able to lower your taxable income significantly.

Saver's credit

The saver's credit is designed to incentivize retirement savings for low- to moderate-income individuals and families. This credit allows you to claim 10% to 50% of up to $2,000 ($4,000 if filing jointly) in contributions to an IRA, 401(k), 403(b) or certain other retirement plans. The percentage you can claim depends on your filing status and income level, providing a valuable tax break for those saving for retirement.

Home office deduction

Working from home these days? You may be eligible for the home office deduction. This allows you to write off certain expenses associated with using part of your home for business purposes, such as rent, utilities and maintenance costs. To qualify, you must use a specific area of your home regularly and exclusively for business-related activities. Taking advantage of this deduction can help offset the costs of running a home-based business.

Energy efficient home improvement tax credit

Under the revamped energy efficient home improvement tax credit, homeowners who make qualifying energy-efficient upgrades to their homes can recoup up to $3,200 on their investments. Eligible improvements include energy-efficient windows, doors, heat pumps and other upgrades that meet certain criteria. By investing in energy-efficient upgrades, homeowners can not only save money on their energy bills but also qualify for valuable tax credits.

Making tax time less taxing

There’s still time to snag some useful tax credits and deductions — and maybe discover a few you didn’t know about. As you’re gathering paperwork and adding up the numbers, make sure to consult a tax professional who understands your financial situation and can help you maximize the tax-saving strategies you deserve. Spectrum Credit Union does not provide personal tax advice, and the tips outlined here may or may not apply to your individual situation.

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