Available credits and deductions vary by year and political administration, but many are longtime favorites. To understand how to maximize the opportunities, it's important to have an idea of what's available. Check out this sampling of often-used credits and deductions [source: IRS]:
- The earned income tax credit (EITC) is designed for low- to mid-income people, typically with dependent children. There are income limits, which vary based on joint or single filing status, as well as a number of other requirements to receive this significant and often overlooked credit.
- The child and dependent care credit pays parents back for child care costs required in order for the parent(s) to work or actively look for a job.
- The adoption credit helps cover costs associated with adopting a child. The amount varies based on whether the adoption was foreign or domestic, or if the child has special needs, among other factors.
- The saver's credit benefits low- to mid-income workers who contribute to retirement plans like a 401(k) or IRA.
- The American opportunity tax credit expanded on the hope credit to allow more people to more easily pay for college-related expenses. The IRS actually has a handy app designed to help people determine if they're eligible for this or other education credits.
- Making energy-efficient home improvements can also score some modest credits. Adding items like solar panels and energy-friendly doors, windows or insulation are smiled upon by the federal government, so take note!
- Home-office expenses. In previous years, it was necessary to itemize the correct portions of the monthly utility and mortgage bills, but since 2014, taxpayers can just deduct $5 per square foot of home-office space, with a limit of $1,500
- Necessary business expenses not reimbursed by your employer
- Home mortgage interest and real estate taxes
- Student loan interest. This deduction is worth up to $2,500, depending on how much interest was paid throughout the year and other qualifying factors.
- Charitable contributions
- Alimony payments
- Moving expenses related to a new job, provided certain distance and time requirements are met
- The medical and dental expense deduction is available, but pretty tough to qualify for, because expenses have to be in excess of 10 percent of your AGI.
- State or local sales tax