2023 Top Tax Deductions + Credits
taxes

Date

We’re roughly six weeks from this year’s April 15th Income Tax Filing Deadline. The IRS has reportedly received about 45 million tax returns. And the agency has already issued $92 billion in refunds.

All of which means… If you have yet to get in gear in preparing for your 2023 tax filing — The time is NOW!

Of course, a big part of your annual income tax filing is ensuring you take full advantage of deductions and credits to minimize your tax liabilities.

To help facilitate both your preparation and minimizing your bill, here are several key deductions and credits to consider as you organize together your 2023 income tax filing:

Child Tax Credit

Families with minor children under 17 are potentially eligible for a tax credit of $2,000 per child. Only $1,600 of this credit is refundable on your 2023 return. But this may change subject to legislation expanding child tax credits currently working its way through Congress.

Eligibility is based on meeting the following criteria:

  • Modified adjusted gross income, or MAGI, of $200,000 or less or $400,000 or less when filing jointly.
  • The child was under the age of 17 as of December 31, 2023.
  • The child has a valid Social Security Number.
  • You have legal standing to claim the child as a dependant (this could include a stepchild, foster child, sibling, half-brother or half-sister, grandchild, niece, or nephew).
  • The child has contributed to no more than half of their financial support this tax year.
  • The child has lived with you for over half the year.
  • You’re claiming them as dependents on your tax return.
  • You are a US citizen or possess a Green Card.

Earned Income Tax Credit (EITC)

Available to both single persons without children or dependents and families with multiple dependents, the EITC is designed to aid low-to-moderate-income taxpayers. The credit ranges from $600 to a maximum of $6,935.

Here’s a link to a table provided by the IRS that outlines the credit based on your Adjusted Gross Income (AGI): Earned Income Tax Credit Table

Tax Deductions for Homeowners

Homeowners are eligible for a bevy of income tax deductions, including:

Mortgage Interest Deduction — Homeowners filing taxes jointly and single tax filers can deduct all payments for mortgage interest on the first $750,000 of their mortgage debt. This ceiling rises to $1,000,000 if you’re deducting mortgage interest on a loan initiated before December 15, 2017.

Mortgage Points Deductions — When taking out a home loan, you can purchase “discount points” to reduce your effective interest rate. The IRS views mortgage points as prepaid interest and allows payments for points to be added to your total mortgage interest (entered on Line 8 of 1040 Schedule A).

A Portion of Property Taxes — Homeowners can deduct up to $10,000 combined from their property taxes and state and local income taxes.

Home Office Deductions — Homeowners using any part of their principal residence (whether you own or rent) “exclusively and regularly” for their business (which can include a “side gig”) can claim home business expenses (on the IRS Form 8829).

Deduction on Sale of Primary Residence — If you sell a home you’ve lived in for more than two years, you can exclude up to $500,000 for joint filers and $250,000 for single filers on your capital gains taxes.

Green Energy Tax Breaks

These credits and deductions are mainly available to homeowners, but regardless, they can generate significant savings on your annual tax bill.

Energy Efficiency — The residential clean energy credit can give you 30% back on any money you spent installing solar electricity, solar water heating, wind energy, geothermal heat pumps, biomass fuel systems, or fuel cell property.*

*These deductions are a bit more complicated and divided into two categories:

1. Residential energy property costs — This is a flat tax credit of $50 to $300 for installing Energy Star-certified items like heat pumps, water heaters, or furnaces.

2. Qualified energy efficiency improvements — This is a 10% tax credit for the cost of improvements like adding insulation, fixing a roof, or replacing windows.

EV Charging Stations — Homeowners who install an Electric Vehicle (EV) charging station are eligible for a tax credit of up to 30% of their annual bill or $1,000 (whichever is higher).

More Questions About Deductions + Credits?

While the items outlined above are the most readily available deductions and credits, they are by no means the only options. In fact, there are potentially many more. It all depends on your individual circumstances.

If you have additional questions about your tax return — Get in touch for a FREE consultation!

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