Tax filing begins on Monday, January 24: Don't be sluggish on these 13 credits and deductions

Tax filing begins on Monday, January 24: Don't be sluggish on these 13 credits and deductions ...

With all of the new deductions and credits in 2021, you might be able to claim even more. For example, there was an expansion of the, an extension of the and forgiven student loans are now tax-free through 2025.

A list of the most useful tax deductions for most filers has been compiled, including those who are not self-employed -- and a group with its own, mostly separate, set of.

In the tax year 2021, tax returns would be included on a tax return that the IRS makes to taxpayers.

1.Child tax credit

The new child tax credit was made fully refundable in 2021 and increased to $3,600 per year per child through age 5 to 17. Unless they are unenrolled, eligible families will receive the remainder of the benefit they didn't get through the advance monthly installments in 2022.

Dependents between the ages of 19 and 24 can qualify for $500 each, but they must be enrolled in college full time.

Subsidiary dependents are:

  • Child
  • Stepchild
  • Foster child
  • Sibling
  • Step-sibling
  • Half-sibling
  • Grandchild
  • Niece/nephew
  • Adopted child

If you opt out of advance payments, you will not be able to claim the full deduction at tax time. The IRS will issue a press release in January 2022 to let you know how much you have received in advance child tax credit disbursements.

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2.Recovery rebate credit (for a missing stimulus payment)

If you never received your third stimulus payment and were eligible or if you were not paid the full amount, you may be eligible for the.

3.Earned Income Tax Credit

The IRS has specifically not specified households that might qualify for the EITC, but if you aren't contacted by the time you sit down, you can check eligibility with the.

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4.Lifetime learning credit

The, or LLC, applies to higher education candidates; you, your spouse, or a dependent must pay the price for qualifying higher education expenses.

If your MAGI was between $58,000 and $68,000, you might claim the full credit on your 2020 tax return. You might also claim the full credit on your MAGI if your MAGI was between $118,000 and $138,000 for the partial credit. We don't know the exact thresholds for 2021 tax returns, but those numbers will be released in January 2022.

This credit is worth 20% of the first $10,000 you pay in qualifying higher education expenses, which means you can earn up to $2,000. The LLC is not refundable, however, so you can only use this credit to lower your tax bill, but you will not receive any money as a refund.

5.A Credit for Opportunity in the United States

AOTC is for first-time college students for their first four years of college or other higher education, which makes it different from the LLC (above). If you're pursuing a degree and haven't had a felony drug conviction, you might qualify if you meet income thresholds.

Your modified adjusted gross income would not exceed $80,000 per year for your 2020 tax return if you qualify for the full credit, but it would have risen between $80,000 and $90,000 for the partial credit. The exact thresholds for 2021 tax returns will be released in January 2022.

This credit is partly refundable, but if deducting it reduces your tax balance to zero, a 40% portion of the remaining amount of this credit (up to $1,000) may be returned to you as a tax refund.

6.Credit for children and children with disabilities

If you are a parent or a dependent in your household, you may be eligible for or refunded for your child care expenses in 2021. The amount you can claim maxes out at $8,000 for one dependent and $16,000 for two or more people.

7.Saver's credit

If you make contributions to an or employer-sponsored retirement plan, such as a 401(k), you may qualify for the. If you are a full-time student, you may be eligible for the.

The credit limit for a saver in 2022 has been raised.

Credit rate Head of household Married (filing jointly) All other filers (single, married and filing separately, widowed)
50% of your contribution AGI not more than $30,750 AGI not more than $41,000 AGI not more than $20,500
20% of your contribution $30,751 - $33,000 $41,001- $44,000 $20,501 - $22,000
10% of your contribution $33,001 - $51,000 $44,001 - $68,000 $22,001 - $34,000
0% of your contribution more than $51,000 more than $68,000 more than $34,000

8.Adoption tax credit

There are also benefits for expenses related to. The adoption tax credit covers adoption fees, court costs, attorney fees, traveling expenses and other expenses that are directly related to adoption.

For the 2020 tax year, the maximum amount of adoption was $14,300 per child. The IRS will publish the adoption tax thresholds in January 2022.

9.Medical and dental expenses

You might need to pay out of pocket for medical expenses even with insurance, so long as the total amount exceeds 7.5 percent of your AGI.

  • Fees to doctors, dentists, specialists, mental health professionals and even nontraditional medical practitioners
  • Hospital care, residential nursing home care and acupuncture treatments
  • Treatment for alcohol, drug addiction, smoking-cessation programs and prescription drugs for nicotine withdrawal and related addiction needs
  • Payments for insulin, eyeglasses, contact lenses, hearing aids, crutches, wheelchairs, guide dogs and other service animals

Funeral expenses, over-the-counter medications, and most cosmetic surgery aren't deducted.

10.Residential energy credit

You might claim a. The credit for the energy-efficient homeowner includes:

  • Energy-efficient windows and doors
  • Roofs
  • Insulation
  • Energy-efficient heating and AC systems
  • Water heaters
  • Biomass stoves
  • Qualifying solar electric property and solar water heaters

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11.Student loan interest deduction

If you paid interest on private loans or resumed federal student loan payments for yourself, your spouse or another dependent, you may claim the deduction as a compensation to your income rather than an itemized deduction.

For 2020 tax returns, you were able to deduct either $2,500 or the actual amount of interest you paid during the year, depending on what you paid. We'll update the tax deduction limits for 2021 as they become available.

12.Contribution to a health savings account

You may pay a federal income tax in addition to a tax deduction for your health savings account.

The IRS has released an early draft on the, but this information might be updated in early 2022.

13.Contributions to charitable causes deductions

There are many ways to obtain a tax deduction, including deducting contributions of money or property you donated to qualifying organizations, but you'll need to classify your deductions.

In most cases, you can deduct up to 100% of your AGI, but there are some instances where you might be limited to 20% or 30%.

A deposit of information and advice for you to help you make the most of your decisions when you are spending money.

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