22 Essential Tax Deductions and Credits You Can Claim in 2024-2025
Tax deductions and tax credits are two distinct types of tax breaks that can help reduce your tax burden. A tax credit provides a dollar-for-dollar reduction in your tax owed, while a tax deduction reduces your taxable income.
Popular Tax Credits for 2024
- Child Tax Credit (CTC)
- Up to $2,000 per child under 17
- $1,700 potentially refundable
- Income requirements apply
- Child and Dependent Care Credit (CDCC)
- Up to 35% of $3,000 for one dependent
- Up to 35% of $6,000 for multiple dependents
- Covers childcare and similar costs
- Education Credits
- American Opportunity Credit: Up to $2,500 for education expenses
- Lifetime Learning Credit: Up to $2,000 (20% of first $10,000 in expenses)
- Earned Income Tax Credit (EITC)
- Ranges from $632 to $7,830
- Based on income, marital status, and number of children
Key Tax Deductions for 2024
- Housing-Related
- Mortgage interest
- Property taxes (part of SALT deduction, limited to $10,000)
- Home office expenses for self-employed
- Education and Savings
- Student loan interest (up to $2,500)
- IRA contributions
- 401(k) contributions (up to $23,000, or $30,500 if 50+)
- HSA contributions
- Medical and Health
- Medical expenses exceeding 7.5% of adjusted gross income
- Health savings account contributions
- Business and Work
- Self-employment expenses
- Educator expenses (up to $300)
- Energy-Related
- Solar tax credit (30% of installation costs)
- Energy-efficient home improvements (up to $3,200)
- Electric vehicle credit ($3,750-$7,500)
Important Distinctions
Above-the-Line Deductions:
- Taken before calculating adjusted gross income (AGI)
- Available regardless of whether you itemize
- Include retirement contributions and student loan interest
Below-the-Line Deductions:
- Choose between standard deduction or itemizing
- Standard deduction for 2024: $14,600 (single filers)
- Itemized deductions include charitable donations and mortgage interest
Tax Credits vs. Rebates:
- Credits reduce tax liability directly
- Some credits are refundable
- Rebates are typically automatic and can occur year-round
- Most tax credits only available during tax season