Top Tax Deductions and Tax Credits: Unlock the Full Potential of Your 2023 Tax Return You Can’t Afford to Miss

As we enter the new year, many individuals and businesses are looking for ways to minimize their tax liabilities. Knowing the top tax deductions and tax credits for 2023 can help taxpayers make informed decisions and potentially save them money.

If you got payments for the child tax credit early this year, you won’t be able to get the full deduction when you file your taxes. (Photo: https://www.cnet.com/)

Tax Deductions:

1. Standard Deduction – For the 2023 tax year, the standard deduction for single filers is $13,800, an increase of $200 from the previous year. Married couples filing jointly can claim a standard deduction of $27,600, an increase of $400 from 2022.
2. Charitable Donations – Taxpayers who make charitable donations can deduct up to 60% of their adjusted gross income (AGI) for cash donations, up from 50% in 2022. Non-cash donations are still limited to 30% of AGI.
3. State and Local Taxes – Taxpayers can deduct up to $10,000 in state and local taxes, including property taxes and either sales taxes or income
4. Home Office Deduction – Self-employed taxpayers can deduct expenses related to a home office, such as mortgage interest, property taxes, utilities, and repairs. The simplified option allows a deduction from $5 per square foot to 300 square feet.
5. Health Savings Account (HSA) Contributions – Taxpayers with high-deductible health plans can deduct contributions to an HSA up to $3,750 for individuals and $7,500 for families in 2023.

Read Also: Tax Season 2023: Update on Home Office Tax Deductions

Tax Credits:

1. Earned Income Tax Credit (EITC) – Low to moderate-income workers may be eligible for the EITC, which can provide up to $6,728 for families with three or more qualifying children. The maximum credit for families with two children is $5,936.
2. Child Tax Credit (CTC) – The CTC was expanded in 2021 and will remain in effect for 2023. Eligible families can receive up to $3,000 per child under age 18 and $3,600 for children under age 6.
3. Education Credits – The American Opportunity Tax Credit (AOTC) provides up to $2,500 per eligible student for qualified education expenses. The Lifetime Learning Credit (LLC) provides a credit of up to $2,000 per tax return for qualified education expenses.
4. Dependent Care Credit – Parents who are paying for childcare while they work may be eligible for the Dependent Care Credit. The credit can be up to $1,050 for one dependent and up to $2,100 for two or more dependents.
5. Residential Energy Credits – Taxpayers who make energy-saving improvements to their homes, such as installing solar energy panels or upgrading insulation, may be eligible for a tax credit of up to 26% of the cost.

Read Also: Available Tax Credit Programs for Tuition and Fees Deduction in 2023

Bottom Line

It’s essential to keep in mind that tax deductions and tax credits can change often, so it’s always a good idea to talk to a tax expert or financial advisor to make sure you’re taking advantage of all tax deductions and tax credits.

Also, taxpayers should keep accurate records of their expenses and receipts to back up any tax deductions or credits they claim. People and businesses can lower their tax bills and keep more of their hard-earned money if they stay informed and use the tax breaks that are available.

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