Millions of Americans are leaving thousands of dollars on the table every tax season simply because they don’t know the breaks they can claim.
Taxes can feel like a monster under the bed, a big, scary thing that takes a bite out of every paycheck. It’s easy to get frustrated by the forms and jargon, so many people just give up and pay whatever the government asks. But buried inside all those rules and regulations are a bunch of secret handshakes and back doors that can put a serious amount of money back in your pocket. These aren’t loopholes for the super-rich; they’re legitimate tax breaks for everyday folks.
By understanding what you can claim, you can lower your taxable income and reduce the amount of money you owe. It’s like finding a rebate on your taxes. A little knowledge and some smart planning can make a significant difference in your bottom line. You work hard for your money, so why not let some of it work for you by taking advantage of every tax break you’re entitled to? Here are 12 ways to do just that.
Contribute to a 401(k) or IRA
This is one of the most powerful tax breaks out there, and it’s something you can do all year long. Money you contribute to a traditional 401(k) or IRA is often pre-tax, meaning it lowers your taxable income for the year. Not only are you saving for retirement, but you’re also saving on your tax bill right now. It’s a win-win situation.
Claim the Child Tax Credit
If you have kids, this is a big one. The Child Tax Credit is a significant tax break for parents. The amount of the credit can change, but it can drastically reduce the amount of tax you owe. For example, for the 2025 tax year, the credit is worth up to $2,200 per qualifying child. A United States CBO report states that the Child Tax Credit lifted 2.9 million children out of poverty in 2021.
Deduct Your Student Loan Interest
If you’re still paying off student loans, you may be eligible for a tax break on a portion of the interest you paid during the year. This deduction can lower your taxable income. It’s a nice little bonus that can make those loan payments feel a little less painful.
Deduct Medical and Dental Expenses
If you had a year with a lot of medical bills, you might be able to deduct a portion of those expenses. This can include everything from doctor visits to prescription medications and even some travel costs for medical care. You can only deduct the amount that exceeds a certain percentage of your adjusted gross income, so it’s best for people who had a costly year for health care.
Use a Flexible Spending Account (FSA) or Health Savings Account (HSA)
Flexible Spending Accounts (FSA) and Health Savings Accounts (HSA) are excellent options for covering medical expenses with pre-tax money. You deposit money into the account before taxes are deducted, and then you use it to pay for expenses such as copays, prescriptions, and glasses. It’s a simple way to save money on health-related costs.
Claim the American Opportunity Tax Credit
If you’re a college student or a parent of one, this credit is a must-know. The American Opportunity Tax Credit can help you get a tax credit for college expenses, including tuition, fees, and course materials. It’s a valuable credit that can save you a bundle on education costs. The IRS states that the credit can be worth up to $2,500 per eligible student.
Take the Home Office Deduction
For those who work from home, the home office deduction can be a lifesaver. You can deduct a portion of your rent or mortgage, utilities, and other home expenses based on the percentage of your home used for business. The IRS makes it pretty simple with a streamlined option. The BLS reports that approximately 33% of employed adults worked from home in 2024.
Deduct Your State and Local Taxes
If you itemize your deductions, you can deduct state and local taxes, including income, sales, and property taxes. There’s a limit to how much you can deduct, but for many people, this can add up to a significant tax break. It’s a good way to get some of your money back from local and state governments.
The Earned Income Tax Credit
This is a tax credit for low-to moderate-income workers and families. It can be a very substantial credit that can result in a larger refund. It’s a lifeline for many people. According to the Tax Policy Center, the Earned Income Tax Credit lifted 5.6 million people out of poverty in 2018.
Deduct Charitable Contributions
If you’re someone who gives to charity, you can deduct those contributions on your tax return. This includes donations to churches, schools, and other qualifying non-profits. You’ll need to keep good records, so hold on to those receipts and acknowledgment letters.
The Saver’s Credit
This credit is a great incentive for low-to moderate-income people to save for retirement. If you contribute to a 401(k) or IRA, you might be able to get this tax credit. It’s an extra boost to your retirement savings that you don’t want to miss.
The Lifetime Learning Credit
This credit is available to students pursuing a degree or seeking to enhance their job skills. It can be used for undergraduate, graduate, and even non-degree courses. Unlike the American Opportunity Tax Credit, there’s no limit on the number of years you can claim it, making it perfect for lifelong learners. It’s a handy tool to help with education costs.
Disclaimer – This list is solely the author’s opinion based on research and publicly available information. It is not intended to be professional advice.
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