Boost Your Tax Savings with Deductions and Credits: Lower Your Taxable Income and/or Maximize Your Refund

One of the easiest ways to maximize your tax refund and keep more of what you earn is by understanding commonly overlooked deductions and credits. Many taxpayers miss out on these valuable tax breaks simply because they don’t know they qualify. At Pittsburgh Logos Tax and Business Solutions, we’re here to help you uncover these opportunities and ensure you’re not leaving money on the table.

Let’s take a closer look at 10 commonly overlooked deductions and credits that could help you reduce your tax liability and increase your refund.

1. Earned Income Tax Credit (EITC)

I'll be following up with a separate blog that provides a more detailed explanation of how the EITC works and the specific requirements to qualify.

The Earned Income Tax Credit (EITC) is a refundable credit designed to help low- to moderate-income working individuals and families. Despite its value, many eligible taxpayers fail to claim it.

Eligibility Requirements:

• You must have earned income from wages, self-employment, or other sources.

• Your adjusted gross income (AGI) must fall within certain limits based on your filing status and the number of qualifying children.

• You must meet age and residency requirements.

How It Works:

The credit amount varies depending on your income and family size. For example, a taxpayer with three or more qualifying children may receive a maximum credit of $7,430 in 2024.

For more details, refer to IRS Instructions for Form 1040.

2. State and Local Taxes (SALT) Deduction

The State and Local Taxes (SALT) deduction allows taxpayers to deduct up to $10,000 ($5,000 if married filing separately) in state and local property, income, or sales taxes.

How It Works:

• You can choose to deduct state and local income taxes or state and local sales taxes, whichever is higher.

• This deduction is especially beneficial for taxpayers in high-tax states.

Make sure to check your Schedule A to see if you qualify.

3. Charitable Contributions

If you made donations to qualified charities, you may be eligible to deduct those contributions.

Eligibility Requirements:

• Contributions must be made to IRS-approved organizations.

• You must have receipts or written acknowledgment for donations over $250.

How It Works:

You can deduct cash donations, as well as the fair market value of donated goods. This deduction is claimed on Schedule A if you itemize your deductions.

4. Education Credits

There are two key education credits that can help reduce your tax bill:

American Opportunity Tax Credit (AOTC):

• Provides a credit of up to $2,500 per eligible student for tuition, fees, and course materials.

• Available for the first four years of post-secondary education.

Lifetime Learning Credit (LLC):

• Offers a credit of up to $2,000 per return for tuition and related expenses.

• There is no limit on the number of years you can claim this credit.

For both credits, income limits apply. Refer to IRS Form 8863 for more details.

5. Retirement Contributions

Contributions to traditional IRAs and 401(k) plans can provide immediate tax benefits.

How It Works:

• Contributions to a traditional IRA may be tax-deductible, depending on your income and whether you’re covered by a retirement plan at work.

• Contributions to a 401(k) are made with pre-tax dollars, reducing your taxable income.

For 2024, the contribution limit for 401(k) plans is $23,000, with an additional $7,500 catch-up contribution for taxpayers over age 50.

6. Health Savings Accounts (HSAs)

Health Savings Accounts (HSAs) offer triple tax advantages: contributions are tax-deductible, funds grow tax-free, and withdrawals for qualified medical expenses are tax-free.

Eligibility Requirements:

• You must be enrolled in a high-deductible health plan (HDHP).

Contribution Limits for 2024:

• $3,950 for individuals.

• $7,900 for families.

• Additional $1,000 catch-up contribution for taxpayers over age 55.

7. Student Loan Interest Deduction

If you paid interest on a qualified student loan, you may be able to deduct up to $2,500.

Eligibility Requirements:

• The loan must have been used for qualified education expenses.

• Your modified adjusted gross income (MAGI) must be below a certain threshold.

This deduction is available even if you do not itemize deductions.

8. State Tax Paid Last Spring

Did you pay state income taxes when you filed your 2023 state tax return? If so, you may be able to deduct that payment on your 2024 federal return.

How It Works:

This deduction is typically claimed on Schedule A if you itemize your deductions.

9. Home Energy Credits

Home energy credits are available for energy-efficient home improvements.

Eligibility Requirements:

• Improvements must meet energy efficiency standards set by the IRS.

Examples of Qualifying Improvements:

• Solar panels.

• Energy-efficient windows and doors.

• Insulation upgrades.

Refer to IRS Form 5695 for more details.

10. Gambling Losses

Did you know you can deduct gambling losses if you itemize deductions?

How It Works:

• You can deduct gambling losses up to the amount of your gambling winnings.

• Keep detailed records of your wins and losses, including receipts and tickets.

Gambling losses are reported on Schedule A.

Final Thoughts: Maximize Your Tax Savings

By taking advantage of these commonly overlooked deductions and credits, you can reduce your tax liability and increase your refund. At Pittsburgh Logos Tax and Business Solutions, we’re here to help you navigate the complexities of the tax code and ensure you’re getting all the deductions and credits you deserve.

Don’t leave money on the table! Contact us today to schedule a consultation and learn how we can help you keep more of what you earn.