6 Tax Deductions And Credits You May Not Know About
Clever ways to get the most out of tax season.
Tax time can be stressful no matter what your personal situation is — should you do them yourself or hire a professional? If you do them yourself, how do you make sure you’re not overpaying or receiving less of a refund than you deserve? If you hire someone, how do you know who to trust? As an outsider, the world of taxes can feel intimidatingly labyrinthine, with plenty of unknown hidden doorways and secret passages to saving money or getting more back.
That’s why TurboTax is committed to $0 Any Way, their 2022 tax season offer that allows anyone with a simple tax return to complete their taxes for free, with as much or as little help as they want. For those who choose to do it all themselves and all online (even from a smartphone), there’s TurboTax Free Edition. For those looking to get help from a tax expert along the way, there’s TurboTax Live Basic Offer. And for those who really want to fully hand their taxes over, TurboTax Live Full Service Basic Offer matches users with a tax expert who’ll take care of it all once all documents have been uploaded. TurboTax is happy to guide you through easily filing your taxes and getting your biggest tax refund — all for $0.
The limited time TurboTax Live Basic and TurboTax Live Full Service Basic offers are available for taxpayers with a simple tax situation, through March 31. TurboTax Free Edition is available all season. TurboTax Free Edition, TurboTax Live Basic, and TurboTax Live Full Service Basic are designed for tax filers with a simple tax situation, filing Form 1040 only. Simple situations covered include W-2 income, limited interest and dividend income, standard deduction, Earned Income Tax Credit, Child Tax Credit, and Student Loan interest.
To make things even simpler, we’ve outlined some of the most commonly overlooked tax credits TurboTax and your TurboTax Live expert will make sure you don’t miss if you are eligible.
Earned Income Tax Credit
It’s been just over a year since the American Rescue Plan vastly expanded eligibility for the Earned Income Tax Credit , so it’s no surprise if you’re not familiar with it. With the EITC, low-to-moderate earners could be eligible for a credit of up to $6,728, depending on marital status, number of children, and other personal info. The credit has been around since the ‘70s but has long been limited to those with children and those over the age of 24. Thankfully, because of the pandemic, it has temporarily been expanded to include those who are childless and ages 19-25.
Standard Deduction
Many who are new to filing taxes don’t even know that the IRS automatically gives you a set amount of deductions that are adjusted for inflation every year even if you don’t have those substantial deductions that you get for those adulting related expenses like home mortgage interest. The standard deduction will reduce your taxable income and is $12,550 if you file single, $25,100 married filing jointly, and $18,800 if you file as head of household.
Student Loan Interest
Nothing in the world of finances is more stress-inducing than student loans, but thankfully the interest on those loans can help you save some money (or get a higher return) around tax season. Not only can you write off up to $2,500 of the interest you’ve paid, but you can even claim it if you’ve been lucky enough to have a family member (or anyone, really) pay it for you — that is, if you haven’t been claimed as a dependent.
Recovery Rebate Credit
Speaking of not being claimed as a dependent, if no one else claimed you as a dependent for 2021 and you didn’t receive the third stimulus, you can claim the recovery rebate credit up to $1,400 when you file your taxes.
Child Tax Credit
If you became a new parent in 2021, congratulations! You may be able to claim the Child Tax Credit, which was also increased under the American Rescue Plan. The Child Tax Credit increased from $2,000 up to $3,600 for each dependent child under 6 and up to $3,000 for each dependent child ages 6 - 17 for 2021. If you were already a parent before 2021 you also may have received advance payments of your Child Tax Credit starting last July. If you did receive advance payments, remember that was a portion of your Child Tax Credit and you should have IRS letter 6419 so you can report the correct amount of advance payments when you file.
Cash Donations
Generally you can only write off charitable contributions if you itemize your deductions, but with the passage of the American Rescue Plan the 90% of taxpayers that now claim the standard deduction can deduct up to $300 in cash contributions and up to $600 if you are married filing jointly.
