The IRS is ever vigilant to make sure that you pay your fair share of taxes. Fortunately, embedded in the tax code are a host of credits and deductions that you may qualify for during tax preparation time.
Deductions and credits available for 2022
Deductions and credits reduce your tax burden. Credits are the better of the two because they reduce your tax liability dollar for dollar. Deductions, on the other hand, lower your taxable income, which also minimizes your tax bill. Here are a few of the most important to be aware of this year:
• Medical expenses: If you itemize, you may be able to deduct the sum of your health-related expenses. To do so, your total medical and health-related expenses must be 7.5% or more of your adjusted gross income (AGI).
• Donations to charity: Donations to qualified charities such as churches, food banks, or human relief agencies may be deductible. Charitable donations are especially useful if you itemize your deductions. However, even if you use the standard deduction, the IRS will let you take up to a $600 deduction.
• Earned income tax credit (EITC): The EITC was designed to lower the tax burden of lower-income earners who support children. Eligibility is based on the number of children that you support and your income. For example, if your job pays less than $57,414 and you support three or more kids during 2022 you may qualify. This can save you hundreds to thousands of dollars.
• Child tax credit: If you have children you may qualify for a tax credit of up to $2000 for each child. Income thresholds apply for this credit.
• Business expenses: Having a business may be a profitable enterprise for you. If you run a business you may qualify for tax credits or deductions.
• Foreign tax credit: You might not think you’ve paid any foreign taxes. If you own mutual funds that hold foreign securities, you may have paid tax to a foreign country or two. If so, there may be a credit available to you.
Contact Abbo Tax for a thorough evaluation of your particular tax situation today.
