Tax Credits and Deductions
Learn about tax relief, benefits, and incentives. These include many changes to credits and deductions authorized late last year. Most are retroactive to 2018 and extend through 2020.
Tax Cuts and Jobs Act Updates for 2019
The Tax Cuts and Jobs Act of 2017 made big changes to how the government calculates your income taxes. Most of the changes took effect in 2019 and applied to your 2018 federal tax return. But a few changes went into effect in 2020, and applied for the first time to your 2019 return. The Internal Revenue Service also made adjustments for inflation to some deductions, credits, and tax brackets.
New for 2019 Tax Year: Affordable Care Act Fee Dropped
The health care law’s “individual mandate” is eliminated starting with tax year 2019.
New, Higher Standard Deduction Adjusts for Inflation
The law nearly doubled the standard deduction for most filers last year. The standard deduction for tax year 2019 was
$12,200 for individuals (up $200 from last year to adjust for inflation)
$18,350 for heads of household (up $350)
$24,400 for married couples filing jointly (up $400)
Standard Deduction Versus Itemizing
Deductions lower the amount of income that you pay tax on. You can take the standard deduction or you can itemize deductions. Your standard deduction may now be greater than your total itemized deductions. Learn how to decide to take the standard deduction or to itemize.
Itemized Deduction Changes for 2019
Many itemized deductions were eliminated or capped in 2018. Here are a couple of new changes for 2019.
Tax Rates Stay the Same as in 2018
Tax rates fell last year under the new tax law. The rates remain the same this year, ranging from 10% to 37%. The tax brackets, or income ranges, increased slightly for inflation. Check out this table with the 2019 and 2018 tax rates and brackets.
Personal and Dependent Exemptions Remain at Zero
These were eliminated last year. Prior to that, they lowered your taxable income by $4,050 each for you, your spouse, and your dependents. The higher standard deduction and increases in other credits may help offset the loss of the exemptions.
Child Tax Credit Stays the Same After Doubling in 2018
Tax credits are better than deductions because they reduce your tax bill dollar-for-dollar. The Child Tax Credit now reduces your taxes up to $2,000 per child under 17. (This change went into effect last year.) Many more families now qualify for the credit as income limits have gone up to
$200,000 for individual filers (the same as last year and up from $75,000 two years ago)
$400,000 for married filing jointly (the same as last year and up from $110,000 two years ago)
This is a “refundable” credit, meaning you can get up to $1,400 per child back even if your 2019 tax bill is $0. You must claim the credit on your tax return to get it.
Social Security Number Required for Child Tax Credit
Any child you claim for the Child Tax Credit must now have a Social Security number. They must have the number by the due date of your tax return (including extensions).
Credit for Other Dependents, Created Last Year, Stays at $500
You can now claim a credit for your other dependents, including kids 17 and up and other relatives. To qualify, a dependent must be a U.S. citizen, U.S. national, or U.S. Green Card holder.
Learn More About Tax Reform Law Changes
For more information about the tax law changes, see:
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.
Do I Qualify for EITC?
You qualify for EITC if:
EITC has special rules for:
Get Help With EITC
Use the EITC Assistant to find out your:
Tax Benefits for Education
Educational tax benefits can help with a variety of expenses, including tuition for college, elementary, and secondary school.
Because of new tax law changes, education tax credits, deductions, and savings plans you may have used in the past have changed.
Find Out if You Qualify for Education Benefits
Use the Interactive Tax Assistant to see if you’re eligible for education credits or deductions. This includes the American Opportunity Credit, the Lifetime Learning Credit, and the student loan interest deduction.
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 can be used toward tuition payments and related expenses at qualifying educational institutions. It can help pay for undergraduate, graduate, and professional degree courses. Or, it can help with 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.
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.
Education savings plans help parents and students save 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:
529 plans are qualified tuition programs (QTPs) sponsored by states and colleges. They’re authorized under Section 529 of the Internal Revenue Code. With these plans, you can:
The Coverdell Education Savings Account can be used to pay for eligible K-12 and higher education expenses. You may contribute up to $2,000 per year for each eligible student. When you open the account, the person receiving the benefits must be under 18 or have special needs.
Exclusions from Income
You don’t have to pay tax on payments you receive from your employer 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-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 water heaters
Geothermal heat pumps
These tax credits are valid through 2021.
Energy Tax Breaks for 2018 - 2020
A law passed in December 2019 reauthorized many energy tax breaks that had expired in 2017. They're retroactive to 2018 and extended through 2020 or longer. 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.
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 a 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.
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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December 7, 2020