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 last year and applied to your 2018 federal tax return. But a few changes go into effect this year, and apply 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 in 2019: 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 is

  • $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.

  • New Alimony and Divorce Payments

    • If you pay alimony under a divorce or separation agreement created or changed in 2019 or later, you cannot deduct it.

    • If you receive alimony under an agreement made or modified in 2019 or later, it won’t be included in your taxable income. 
  • Medical and Dental Expenses

    • For tax year 2019, you can deduct unreimbursed medical and dental expenses that exceed 7.5% of your adjusted gross income, just like last year.  
    • The threshold was supposed to go up to 10% for 2019 but was canceled out as part of a new law signed in late 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 Put 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 the 2017 Tax Reform Law Changes

For more information about the tax law changes, including last year’s itemized tax deduction changes, see:

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.

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

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.

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 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.

Deductions

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.

Savings Plans

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:

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 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

Federal Energy Tax Breaks

Energy-Saving Home Improvements

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

  • Solar panels

  • Solar water heaters

  • Wind turbines

  • Geothermal heat pumps

  • Fuel-cell equipment

These tax credits are valid through 2021. 

New Energy Tax Breaks for 2018 - 2020

A new law passed in December 2019 reauthorized many energy tax breaks that had expired in 2017. They're now 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 for individuals and businesses recovering from a major disaster or emergency.

Get Your Refund Faster

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 Wildfires and Hurricanes

Learn about tax relief for victims of the California wildfires and for hurricanes 

Tax Relief for Earthquakes

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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Last Updated: February 21, 2020

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