Tax Deductions and Credits to Consider This Tax Season

The closest things to magic words when it comes to taxes are deductions and credits. Both help you keep more money in your pocket instead of Uncle Sam’s, but in slightly different ways.

Tax deductions help lower the amount of your income that can actually be taxed. Some deductions are only available if you itemize, while others are still available even if you decide to take the standard deduction.
Tax credits, on the other hand, are dollar amounts actually subtracted from your tax bill, and there are two types: refundable and nonrefundable. If a credit is greater than the amount you owe and it’s a refundable credit, the difference is paid to you as a refund. Score! If it’s a nonrefundable credit, your tax bill will be reduced to zero, but you won’t get a refund. Still a win!

Here are some potential deductions and credits you might be able to claim on your tax return this year. But while it’s never too early to start planning for taxes, the IRS doesn’t always follow our schedule. So keep in mind that the details below could change as tax season approaches.

1. Charitable Deductions

You can deduct charitable contributions you made during tax year 2024 as long as you itemize your deductions and donate to qualified organizations. The limit for charitable deductions is 60% of your adjusted gross income (AGI).6 (By the way, AGI is your total income minus other deductions you’ve already taken.)

2. Medical Deductions

If you found yourself with hefty medical bills in tax year 2024, you might be able to find at least some tax relief.

You can deduct any medical expenses above 7.5% of your adjusted gross income (AGI).7 For example, if your AGI was $100,000, you can deduct out-of-pocket medical expenses above $7,500 in tax year 2024. But you have to itemize your deductions in order to write off those expenses on your tax return.

3. Business Deductions

If you’re self-employed, there are a bunch of deductions you can claim on your tax return—including travel expenses and the home office deduction if you use part of your home for business purposes.8

But if you’re one of the millions of people who work remotely, you won’t be able to claim the home office deduction since it’s reserved for self-employed people only. Sorry!

4. Retirement Account Deductions

If you’re an employee who contributed to a traditional 401(k) throughout the year, you don’t need claim those contributions as tax deductible when you fill out your tax return. That’s because the money was taken out of your paycheck before federal taxes on your income are figured. That’s one less thing you have worry about!

For traditional IRA contributions, you can take a full deduction up to the limit ($7,000 for most folks and $8,000 if you’re 50 or older) if neither you nor your spouse participate in an employer-sponsored plan like a 401(k). Cha-ching!

If you do contribute to an employer-sponsored plan, the deduction phases out as your income increases depending on your filing status:9

Single: You get a full deduction if your income is less than $77,000. You can take a partial deduction if your income is between $77,000 and $87,000. If you make more than $87,000, you don’t get any deduction.
Married filing jointly: You get a full deduction if you make less than $123,000. If your income is between $123,000 and $143,000, the deduction is only partial. Couples making more than $143,000 get no deduction.
Married filing separately: You get a partial deduction if you make less than $10,000. There’s no deduction if you make more than $10,000.

If you’re not covered by an employer-sponsored plan at work but your spouse is, you’ll need to file jointly to get the deduction. You can take a full deduction if you make less than $230,000, a partial deduction if you make between $230,000 and $240,000, and no deduction if you make more than $240,000.10

What if you’re the proud owner of a Roth IRA or Roth 401(k)? The bad news is, your contributions to Roth accounts are not tax-deductible. But the good news (and it’s very good news) is that you won’t have to pay taxes when you take the money out of your account in retirement. (That’s why we recommend investing with Roth IRAs and Roth 401(k)s whenever possible.)

Need help navigating retirement plans? It’s probably a good idea to reach out to an investment professional who can walk you through the process.

5. Earned Income Tax Credit (EITC)

This one’s a biggie. The EITC is a refundable credit designed to help out low- and middle-income households.11 To qualify for the credit, a single filer with no children must have an AGI below $18,591, while the cap for a married couple with three or more children is $66,819.12