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Tax Credits and Deductions

Learn about tax relief, benefits, and incentives to help you save money at tax time.

Earned Income Tax Credit

If you earn a low to moderate income, the Earned Income Tax Credit (EITC) can help you by reducing the amount of tax you owe. To qualify, you must meet certain requirements and file a tax return. Even if you do not owe any tax or are not required to file, you still must file a return to be eligible. If EITC reduces your tax to less than zero, you may get a refund.

Note: If you earned less in 2020 than you did in 2019, you can use your 2019 income to calculate your EITC.

Do I qualify for EITC?

You qualify for EITC if:

  • You have earned income and adjusted gross income within certain limits; AND

  • You meet certain basic rules; AND

You either:

  • Meet the rules for those without a qualifying child; OR

  • Have a child who meets all the qualifying rules for you or your spouse if you file a joint return.

EITC has special rules for:

Get Help with EITC

Use the EITC Assistant to find out:

  • Your filing status

  • If your child qualifies

  • If you’re eligible

  • The amount of credit you may receive

Advance Child Tax Credit

By claiming the Child Tax Credit (CTC), you can reduce the amount of money you owe on your federal taxes. The amount of credit you receive is based on your income and number of qualifying children you are claiming. 

Even if you don’t pay any taxes, you may qualify for a refund of the CTC. 

The CTC was expanded under the American Rescue Plan Act (ARPA) of 2021 for tax year 2021 only. If you are eligible, you will begin receiving advance Child Tax Credit payments on July 15. The payments will continue monthly through December 2021. Under ARPA, families are eligible to receive:

  • Up to $3,000 per qualifying child between ages 6 and 17 
  • Up to $3,600 per qualifying child under age 6 

The Internal Revenue Service (IRS) began sending out letters in early June to more than 36 million families who may be eligible for the monthly  payments.  Most families do not need to do anything to get their payments, as long as they’ve filed their 2020 or 2019 tax return. Learn more about the letter and how it can help you determine your eligibility

Update Your Information for the Advance Child Tax Credit

If you don’t file taxes due to low income, you can sign up for the child tax credit

Or you can use the Child Tax Credit Update Portal to:

  • Confirm if you’re enrolled to receive payments
  • Un-enroll from the Child Tax Credit program to stop payments
  • Provide or update your bank account information

To manage payments with the Child Tax Credit Update Portal, you may use an existing IRS username. Or, if you’re a new user, create an account with ID.me.

Learn all about the child tax credit at childtaxcredit.gov.

Tax Benefits for Education

Tax benefits can help with a variety of education-related expenses. These expenses include tuition for college, elementary, and secondary school.  

Find Out if You Qualify for Education Benefits

Use the Interactive Tax Assistant to see if you’re eligible for education credits or deductions. These include the:

  • American Opportunity Credit

  • Lifetime Learning Credit

  • Student loan interest deduction

Learn About Claiming Education Credits

An education credit helps you pay education expenses by reducing the amount you owe on your tax return. There are two types of education credits:

  • The American Opportunity Tax Credit helps with expenses during the first four years of higher education. You can get a maximum annual credit of $2,500 per eligible student. If the credit lowers your tax to zero, you may get a refund.

  • The Lifetime Learning Credit (LLC) can be used toward tuition payments and related expenses. To use the credit, you must attend a qualifying educational institution. Use the LLC for undergraduate, graduate, and professional degree course expenses. Or, use the credit to help pay for classes that improve job skills. You can claim up to $2,000 per tax return, and there is no limit on the number of years you can claim the credit.

You must meet income limits to be eligible for these credits. And you can’t claim both credits for the same student and the same expenses.

Deduct Student Loan Interest From Your Taxes

A deduction reduces the amount of your income that is subject to tax. As a result, deductions can lower the amount of tax you have to pay. You may qualify for a deduction based on your student loan interest

Understand How Education Savings Plans Work

Parents and students can save for school using education savings plans. These plans can help pay for elementary, secondary, and higher education expenses. The money you save or withdraw from your savings plan for qualified education expenses is tax-free. There are two types of savings plans:

Exclude Education Benefits From Your Income

You don’t have to pay tax on educational assistance benefits you receive from your employer under $5,250. These payments can be for tuition, books, and supplies for a course you’re taking. But, you can’t claim these expenses for any other deduction or credit, including the Lifetime Learning Credit.

Energy Tax Incentives

Energy-related tax incentives can make home and business energy improvements more affordable. There are credits for buying energy efficient appliances and for making energy-saving improvements.

Find out if you qualify for state, local, utility, or federal incentives.

Energy Tax Breaks by State

Energy-Saving Home Improvements

Residential Energy Credits allow savings for any of these purchases for your home:

  • Solar panels

  • Solar water heaters

  • Small wind turbines

  • Geothermal heat pumps

  • Fuel-cell equipment

These tax credits are valid through 2021. 

Energy Tax Breaks for 2020 Tax Year

They include credits for:

  • Energy efficient homes

  • Energy-efficient commercial buildings

  • Nonbusiness energy property

  • Qualified fuel cell vehicles

  • Alternative fuel vehicle refueling property

  • Energy tax incentives for biodiesel and renewable diesel extended through 2022

Tax Relief in Disaster Situations

The Internal Revenue Service (IRS) offers special tax help to individuals and businesses hurt by a major disaster or emergency.  

Get Your Tax Refund Faster After a Disaster

In a federally-declared disaster area, you can get a faster refund by filing an amended return. You will need to claim the disaster-related losses on your tax return for the previous year.

Get guidance from the IRS on amending a tax return or filing an extension after a disaster.

Get Tax Relief for Recent Disasters

Get a list of the most recent disasters which may be eligible for tax relief.

Federal Tax Deductions for Charitable Donations

You may be able to claim a deduction on your federal taxes if you donated to a 501(c)3 organization. To deduct donations, you must file a Schedule A with your tax form. With proper documentation, you can claim vehicle or cash donations. Or, if you want to deduct a non-cash donation, you'll also have to fill out Form 8283.

How Much Can You Deduct?

The amount of money that you can deduct on your taxes may not be equal to the total amount of your donations.

Note: Limits on cash and non-cash charitable donations have increased or been suspended. Learn more about charitable deductions in 2020.

Keep Records of Charitable Donations

To claim deductions, it’s important to keep records of your donations to charities. You may not have to send these documents with your tax returns, but they are good to keep with your other tax records. Common documents include:

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Last Updated: September 20, 2021

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