Tax season can be a stressful and complicated process for many, especially when trying to maximize your refund—but it doesn’t have to be. Before getting started, it is important to inform yourself about the current tax code to ensure accurate filling and an optimized return. With the April 18th deadline for filing fast approaching, this guide will highlight ten key tax credits and deductions that you shouldn’t ignore this current tax season.
Top 10 Tax Credits and Deductions for 2021
1. Earned Income Tax Credit
If you or your family falls under the low to a moderate-income group, then you may qualify for the Earned Income Tax Credit, which can help reduce the overall amount of taxes you owe or increase your refund total.
2. Child Tax Credit
The child tax credit has been increased from previous years and is now fully refundable. You can receive up to $3,600 for children up to five years old and up to $3,000 for children between six and 17 years old.
3. Recovery Rebate Credit
Did you receive a third stimulus payment in 2021? If you were eligible but didn’t receive one or only received a partial amount, you can take advantage of one of the newest tax credits and collect the full amount or the missing portion of your stimulus.
4. Lifetime Learning Credit
This credit covers 20 percent of the first $10,000 you paid in qualifying higher education expenses. Your modified adjusted gross income must fall below when filing individually or below $118,000 if filing jointly to qualify for this tax credit. Because this credit is non-refundable, it can only be used towards your existing tax bill and will not be added to your refund total.
5. American Opportunity Tax Credit
This credit can only be claimed for first-time college students. You can earn back up to $2,500 towards your tax bill or receive up to $1,000 on your tax refund.
6. Adoption Tax Credit
Earn up to $14,440 per child with the adoption tax credit. This refundable amount is meant to cover fees and other expenses immediately related to adopting a child.
7. Medical and Dental Expense Deduction
If you paid out-of-pocket costs for certain medical expenses, then this tax deduction can save you some money if those expenses exceeded 7.5 percent of your adjusted gross income.
8. Residential Energy Deduction
Suppose you made any eco-friendly improvements towards making your home more energy-efficient, such as installing solar panels. In that case, this deduction can save you up to $500.
9. Student Loan Interest Deduction
If you or a dependent continued to accrue student loan interest throughout 2021, you can add this deduction and claim up to $2,500.
10. Charitable Contribution Deduction
According to the IRS, you may deduct charitable contributions made to qualify for non-profit or charitable organizations as long as you itemize your deductions.
Ready to file your 2021 taxes? While you’re filling by mail or electronically, don’t forget to consider these tax credits and deductions to minimize your tax bill or increase your refund! If you need help getting started, contact the tax professionals at Satty, Levine & Ciacco, CPAs. P.C.