Taxpayers can take advantage of numerous deductions and credits on their taxes each year that can help them pay a lower amount of taxes—or receive a refund from the IRS.
You may be able to claim the following 15 common write-offs, which include both tax credits and deductions. Additionally, you may be entitled to write-offs on your state taxes, so check your state tax department’s website to see if you qualify.
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1. Property Taxes
Under the Tax Cuts and Jobs Act, deductible state and local income taxes, including property taxes, are capped at $10,000.
The limit is scheduled to last through the 2025 tax year, unless Congress extends it.
2. Mortgage Interest
The interest you pay for your mortgage can be deducted from your taxes. The write-off is limited to interest on up to $750,000 ($375,000 for married-filing-separately taxpayers) of mortgage debt incurred after December 15, 2017.
If you got your mortgage before December 16, 2017, you can deduct interest on up to $1 million of debt ($500,000 for married taxpayers who are filing separately).
3. State Taxes Paid
Again, you can deduct state income taxes that you have paid, but the write-off is capped at $10,000 for all deductible state and local taxes.
4. Homeowner Deductions
You can deduct mortgage interest, as mentioned above, as well as real estate taxes that you paid during the year for your home.
5. Charitable Contributions
Generally, you can deduct charitable contributions of cash totaling up to 60% of your adjusted gross income, or AGI. Donations of items or property also are considered deductible charitable contributions.
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6. Medical Expenses
Medical and dental expenses qualify for a tax deduction, though you can deduct only the costs that exceed 7.5% of your AGI.
To claim medical-related expenses on your 2023 tax return—which you’ll file in April 2024—the expenses must have been paid in 2023, unless they were charged to a credit card. In those cases, you can deduct the expenses in the year you charged the card, not necessarily the year in which you repaid them.
Trips to your doctor’s office or hospital appointments qualify for medical mileage. For 2023, you can deduct 22 cents a mile for travel you made for medical purposes.
7. Lifetime Learning Credit Education Credits
The lifetime learning credit allows people to claim a tax credit for taking classes at a community college, university or other higher education institution. The maximum amount of expenses you can deduct is up to $10,000 for an unlimited number of years. However, the top credit you can receive per tax return is worth $2,000.
The credit allows for a dollar-for-dollar reduction on the amount of taxes owed. The expenses can include tuition, fee payments and required books or supplies for post-secondary education for yourself, spouse or dependent child. The credit isn’t refundable, which means it can be used to pay any taxes you owe, but you can’t receive any of it as a refund.
The amount of your credit depends on your income. You should check IRS Publication 170 to determine the income qualifications.
Note: You can’t claim this credit in the same year as the American opportunity tax credit using the same expenses.
8. American Opportunity Tax Education Credit
The American opportunity tax credit offers a tax break for the first four years of higher education. The maximum annual credit is $2,500 per eligible student. If the amount of taxes you owe is zero because of this credit, the IRS says 40% of any remaining amount of the credit (with a maximum of $1,000) can be refunded to you.
The credit is worth 100% of the first $2,000 of qualified education expenses paid for each eligible student and 25% of the next $2,000 of qualified education expenses.
“If you, your spouse, or child are in school, make sure to look deeper into education credits,” says Daniel Fan, managing director and head of wealth planning at First Foundation Advisors, an Irvine, California-based financial institution. “For students who are in the first four years of college, this credit could provide greater tax savings than the lifetime learning credit.”
Qualifying expenses include tuition, fee payments and required books or supplies for post-secondary education for yourself, spouse or dependent child.
The amount of your credit is determined by your income. You can’t claim this credit in the same year that you claim the lifetime learning credit.
9. Retirement Credits
The contributions you make to a retirement plan such as a 401(k) or a traditional or Roth IRA give you a tax credit of 50%, 20% or 10%, depending on your AGI, which you report on Form 1040. Any rollover contributions do not qualify for the credit.
The maximum contribution amount that qualifies for the credit is $2,000 ($4,000 if married filing jointly), making the maximum possible credit $1,000 ($2,000 if married filing jointly). The IRS has a chart to help you calculate your credit.
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10. IRA Contributions
The maximum contribution for 2023 in a traditional or Roth IRA is $6,500, plus another $1,000 for people who are 50 years old or more. Your contributions to a traditional IRA are tax-deductible.
The amount increases to $7,000 for contributions during 2024, but there’s no change in the catch-up amount for people aged 50 and older.
11. Self-Employed Health Care Premiums
If you’re self-employed, you can deduct 100% of the health insurance premiums you pay monthly for yourself, your spouse and your dependents, whether or not you itemize deductions, says Robert Charron, a CPA in charge of the tax department at Friedman, a New York-based accounting firm.
If you have kids under 27 at the end of 2023, you can also deduct their premiums—even if they aren’t dependents.
However, you can’t claim this deduction if you’re eligible to participate in a subsidized health plan from an employer for yourself, your spouse, dependents or kids under 27.
12. Student Loan Interest
Student loan interest can be written off your taxes, but the maximum interest you can deduct is $2,500. The amount you may write off depends on your income. Review IRS Publication 970 for more information.
13. Adoption Tax Credit
You may qualify for the adoption tax credit for expenses paid related to the adoption of an eligible child. Some costs that qualify are:
- Reasonable and necessary adoption fees
- Court costs and attorney fees
- Travel expenses
- Other expenses directly related to the principal purpose of the legal adoption
While the credit is nonrefundable, you can carry forward any unused credit for up to five years. The tax credit for the 2023 tax year is $15,950 per child.
14. Home Office Deduction
If you are self-employed or a partner, you can deduct business expenses that are related to your home. However, you can’t take the home office deduction if you are an employee.
Two options are available when deducting the home office deduction: the simplified method and the regular method. The simplified method is easier to use. You multiply the square footage of your home office by $5. You can deduct a maximum of $1,500 (up to 300 square feet).
The regular method allows you to claim actual expenses, such as rent, mortgage interest and repairs, based on the percentage of your home that’s dedicated to your home office. For example, let’s say your home office is 400 square feet, and your total home square footage is 1,600. You can claim 25% (400/1,600) of your total qualified home-related expenses.
15. Solar Tax Credit
You may claim up to 30% of qualified home improvements, including solar water heaters and solar electric panels installed from 2022 through 2032. After 2032, the credit percentage rate decreases to 26% for qualified solar installations that are placed in service in 2033 and 22% for those in 2034.
The credit is nonrefundable. However, you can carry any remainder forward to future years until the credit is exhausted.
Tips for Writing Off Your Expenses and Charitable Contributions
Keeping a good record of your income and deductible expenses in a spreadsheet throughout the year can make filing taxes a lot quicker and easier.
“Preparing and organizing everything for your taxes can seem like a daunting task, but a lot of people come across the same common mistakes,” Fan says. “Don’t forget to always include all sources of income, make sure you are looking for and including all possible deductions, and understand the difference between a deduction and a credit.”
Some common mistakes people make include:
- Not listing all income
- Not accounting for all possible deductions
- Not taking advantage of contributions to retirement accounts to increase tax-deductible contributions
If you are filing taxes with several deductions, start by gathering all the appropriate paperwork, such as Form 1098, Mortgage Interest Statement, for mortgage interest deductions. For other deductions, which are based on expenses or contributions, keep accurate records.
“If you itemize your deductions, then keep track of qualified medical expenses, charitable contributions made, or any other deductions which can be itemized,” says Fan. “If you are likely to take the standard deduction, then record keeping will not be as important.”
Frequently Asked Questions (FAQs)
What is the difference between tax credits and deductions?
While a tax credit and a tax deduction each reduce the amount you owe, a credit is generally more beneficial. That’s because a credit reduces the taxes you owe dollar for dollar, whereas a deduction reduces your taxable income, so that the amount you save is based on your applicable tax rate.
What is the standard deduction?
The standard deduction is an amount you can subtract to reduce your taxable income.
The specific amount of your standard deduction depends on your filing status, age, and other factors. Typically, you’d use the standard deduction if it exceeded your total itemized deductions for the tax year. For the 2023 tax year (and the return you’ll file in 2024), the standard deduction amounts are:
- $13,850 for single and married filing separate taxpayers
- $20,800 for head of household taxpayers
- $27,700 for married filing jointly or qualifying widow(er) taxpayers
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