Tax Credits & Deductions

Credits and deductions can reduce your federal income tax after it’s already been calculated, which makes them a powerful tool for bringing down your tax bill. Learn how to use them to your benefit when you file your taxes.

Frequently Asked Questions

  • What’s the difference between a tax credit and deduction?

    Tax credits reduce the amount you owe to the IRS, and tax deductions reduce your taxable income. You can claim both credits and deductions on your tax return, provided that you meet the qualifications for each. Another key difference is you can claim multiple tax credits if you’re eligible, while you can only claim standard or itemized deductions for your filing status.

  • How do health care tax credits work?

    The premium tax credit is a federal refundable tax credit that lowers your monthly premiums on plans from the Health Insurance Marketplace. It was created to provide affordable health insurance to eligible families and individuals with low to moderate incomes.One of the primary qualifications is that your income must fall between 100% and 400% of the poverty line for your household size. 

  • What are pre-tax deductions?

    Pre-tax deductions typically apply to the workplace and are taken from an employee’s paycheck before any taxes are withheld. One example is a flexible spending account (FSA), which is a special pre-tax spending account that many employers provide as an employee benefit. For most taxpayers, using an FSA is the only way to reduce the tax burden on money that you use to pay medical expenses.

Key Terms

how does an itemized deduction work?
Itemized Deduction
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Rules for Repaying the 2008 First-Time Homebuyer Tax Credit
Image shows property tax deduction rules. You have to itemize it. You must be the property owner to claim the deduction. The total of all your itemized deductions should exceed the amount of your standard deduction to make claiming the property tax deduction worth it. The TCJA also limits the amount of property taxes you can claim.
The Rules for Claiming a Property Tax Deduction
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The Most Commonly Claimed Tax Adjustments to Income
Woman holding toddler pays babysitter at her home.
No More Personal Exemptions? You Can Still Claim These Tax Credits
Teacher in front of class
You Might Qualify for a Special Tax Deduction If You Are an Educator
This illustration answers the question, Do I qualify for the child-/dependent-care tax credit? and includes "You must claim child as a dependent on a tax return," "Child or adult in your care must live with you at least half the year," "Child must be either younger than age 13, or unable to care for themselves because of a disability," "You must pay more than half the costs of maintaining your home," "Professional care for your child or adult dependent must be intended to allow you to work, look for work, or attend school full time," and "If married, your spouse must also be working, looking for work, or in school - or else disabled and thus not able to provide care."
Get a Federal Tax Credit for What You Spend on Child and Dependent Care
are health insurance premiums tax deductible?
Rules for Deducting Health Insurance Premiums on Taxes
A couple works on paperwork for their dependent tax credit.
The Tax Credit for Other Dependents for Tax Year 2021
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Foreign Tax Credit
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Do You Know the Tax Breaks for Older Adults and Retirees?
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The Tuition and Fees Tax Deduction—Its Status and How to Qualify
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What To Know About Home Improvement and Residential Energy Tax Credits
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Can You Get a Tax Deduction for Making an IRA Contribution?
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You Can Dodge RMD Penalties With Qualified Charitable Distributions
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The Personal Property Tax Deduction and What Can Be Claimed
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Tax Planning Tips: Three Ways You Can Reduce Your Taxes
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Advance Premium Tax Credit
A woman sits at her desk in a bright workroom and prepares her taxes.
The Effect of Tax Legislation on Itemized Deductions
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2022 IRA Contribution and Deduction Limitations
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Form 2106
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How and When You Can Deduct Business Mileage for Travel or Commuting
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Tax Breaks for Single Parents
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How Can You Claim a Sales Tax Deduction on Your Federal Taxes?
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Military Members Can Still Deduct Moving Expenses
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What's the Investment Interest Expense Deduction?
Rural house in Vermont.
Learn About the Mortgage Insurance Premium (MIP) Tax Deduction.
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You Might Qualify for a Tax Credit If You've Adopted a Child
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What Are Tax Credits?
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This 3% Business Tax Deduction Went Away in 2018, But It Could Be Back
person in long-sleeved red shirt, sitting on chair looking down at laptop
Should You Take the 1040 Standard Deduction or Itemize?
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Can You Claim a Tax Deduction for Donations Made to Crowdfunding Sites?
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Above-the-Line Deductions
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Tax Deductions and Tax Breaks for Private Schools
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Unified Tax Credit
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IRS Form 1098-E
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Can You Deduct Credit Card Interest on Your Income Taxes?
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Is Your Vehicle Registration Tax Deductible? Yes and No
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Reconciling Advance Payments of the Premium Tax Credit
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Deducting the Early Withdrawal of Savings Penalty on Your Tax Return
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Claiming Medical Expenses as a Tax Deduction
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You Might Qualify for a Tax Credit If You're Elderly or the Disabled
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Tax Credits for Hybrid, Electric, and Alternative Fuel Vehicles
Find Out If the Cost of LASIK Surgery Can Be Deducted From Your Taxes
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How College Costs and Financial Aid Affect Tax Returns
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Can You File as Head of Household or Claim the Earned Income Tax Credit?
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Lower Your Tax Bill With FSA Pre-Tax Deductions
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Can You Get a Tax Deduction for Sending Money to a Prisoner?
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How Did the Tax Cuts and Job Act Affect Single Parents?
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Community Property Deductions Between Spouses
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Is There a Tax Break on Student Loan Interest?
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Can Moving-Back-to-School Expenses Be a Tax Deduction?