Tax Filing 2025: How to maximize your deductions and credits.

Filing your 2024 tax return doesn’t have to be stressful, but it certainly can be time-consuming to properly prepare. By understanding available deductions and credits, staying organized, and leveraging the right tools, you can optimize your return and potentially save thousands of dollars. Here’s what you need to know to maximize your tax savings and how to stay organized for the years ahead.

Deductions

Deductions lower your taxable income, reducing the amount of tax you owe. Here are some common ones:

• Standard Deduction: For 2024, the IRS has increased the standard deduction to $14,600 for single filers, $29,200 for married couples filing jointly, and $21,900 for heads of household.
• Itemized Deductions: If your qualifying deductions exceed the standard deduction, itemizing may be beneficial. Common itemized deductions include:
  • Mortgage interest
  • State and local taxes (SALT) deduction (capped at $10,000 for single taxpayers and married couples filing jointly, $5,000 for married taxpayers filing separately)
  • Medical expenses exceeding 7.5% of your adjusted gross income (AGI)
  • Charitable donations
• Retirement Contributions: Traditional IRA and 401(k) contributions may be deductible, reducing your taxable income.
• Self-Employed Expenses: If you freelance or run a business, deductions like home office expenses, vehicle mileage, and business supplies can lower your tax bill.

Credits

Credits are more valuable than deductions because they directly reduce the tax you owe. Some key credits include:

• Earned Income Tax Credit (EITC): Designed for low-to-moderate-income earners, in 2024 this credit is worth up to $7,830 for eligible families with three or more children, up from $7,430 for 2023. Eligible workers ages 25 to 64 without dependents can claim up to $632 for 2024.
• Child Tax Credit:For each child that qualifies, eligible families can claim up to $2,000 per child under 17. Note that qualify for the full amount you must meet all eligibility factors and your annual income is not more than $200,000 ($400,000 if filing a joint return). Parents and guardians with higher incomes may be eligible to claim a partial credit. The IRS website notes that taxpayers who qualify for the Child Tax credit may also qualify for these tax credits:
  • Child and Dependent Care Credit
  • Earned Income Tax Credit
  • Adoption Credit and Adoption Assistance Programs
  • Education credits
• Education Credits: The American Opportunity Tax Credit (AOTC) and Lifetime Learning Credit (LLC) help offset tuition and education-related expenses.
• Energy Efficiency Credits: Homeowners may qualify for credits when installing solar panels or energy-efficient home improvements.
• Saver’s Credit: Low- to moderate-income earners who contribute to a retirement account may receive a tax credit up to $1,000 ($2,000 for married couples filing jointly).

Proper organization can streamline tax filing and ensure you claim all eligible deductions and credits. Here’s how to stay organized:

• Create a Tax Folder: Use a physical or digital folder to store W-2s, 1099s, receipts, and other tax-related documents.
• Track Expenses Throughout the Year: Use apps like Mint or QuickBooks to monitor deductible expenses.
• Save Contribution Statements: Keep records of charitable donations, IRA contributions, and HSA transactions.
• Review Prior Returns: Examining previous returns can help identify deductions or credits you might have missed.
• Gather Business or Side Gig Documents: If you’re self-employed, organize invoices, receipts, and estimated tax payments.

Whether you file taxes on your own or work with a professional, several tools can make the process easier:

• IRS Free File: Available to taxpayers earning $79,000 or less, this tool provides free tax preparation software.
• Tax Software: Programs like TurboTax, H&R Block, and TaxSlayer offer guided tax filing with deduction and credit recommendations.
• Online Tax Calculators: Use IRS tax calculators to estimate your refund or tax liability before filing.
• Taxpayer Assistance Programs: The Volunteer Income Tax Assistance (VITA) program provides free help for qualifying individuals.
• IRS.gov: The IRS website offers official tax forms, publications, and refund tracking tools.

While many taxpayers can file their own returns, some situations call for professional assistance. Consider hiring a tax professional if:

• You have a complex financial situation, such as multiple income streams, rental properties, or business ownership.
• You’re unsure whether to itemize deductions or take the standard deduction.
• You’ve experienced a major life event (e.g., marriage, divorce, inheritance, or home purchase).
• You need help navigating tax law changes and optimizing deductions.
• You’re facing an IRS audit or need to file back taxes.

Maximizing deductions and credits requires planning, organization, and the right tools. Whether filing independently or with professional help, staying informed about tax-saving opportunities can ensure you keep more of your hard-earned money. Start preparing now to make tax season as smooth and rewarding as possible!