Tax Deductions and Credits Can Save You Money

Double check your federal tax return for any missed deductions and credits before you file it. Michelle Bachtel with H&R Block in Knox says deductions decrease your taxable income, which lowers the amount of money you owe. She says the IRS estimated last year over 4 million people failed to claim tax deductions to which they were entitled last year. 

Deductions vary based on your tax situation. Itemized deductions include medical expenses if they exceed 10 percent of your income. That amount is reduced to 7.5 percent if you’re over 65. Local income taxes, property taxes, excise taxes, mortgage interest and charitable contributions are also deductible. Taxpayers who don’t have enough deductions to itemize can use the federally-set standard deduction instead. Bachtel says as a rule taxpayers who don’t have mortgages can’t itemize. Major credits include the earned income tax credit, child tax credit, American Opportunity Credit and Lifelong Learning Credit. Lesser known credits include ones for residential energy and the savers credit.

Bachtel says you should have receipts and other supporting documentation for any deductions or credits you intend to take. Consult a tax professional for advice.