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Key tax deductions and credits to save you money

how to save money on your taxes
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Have a child headed to college or are you pursuing higher education yourself? Check out these tax credits available for education expenses.

The standard deduction

You generally have two choices when filing your tax return:

  1. Claim the standard deduction (a flat dollar amount) or
  2. Itemize your deductions (add up deductible expenses like medical costs, home mortgage interest, state and local taxes, and charitable contributions).

For 2019, the standard deduction is $12,200 for single filers and $24,400 for married couples.2 Since your itemized deductions replace your standard deduction, it only makes sense to itemize if your itemized deductions are greater than your standard deduction will be.

Child tax credit

Parents may benefit from child tax credit.3 This tax credit is worth up to $2,000 for each qualifying child under the age of 17. Married couples filing jointly can claim the full $2,000 credit per child if their adjusted gross income is under $400,000, while single filers can claim the full amount if their adjusted gross income is under $200,000.

Up to $1,400 of the child tax credit refundable. This is a great feature for those whose total tax burden is less than the value of the tax credit. In those cases, the tax credit is first used to offset the taxes you owe for the year. The IRS will then refund you the remaining amount, up to $1,400.

There is also a separate credit for dependents that aren't kids under age 17. This credit is worth up to $500 for dependents, such as elderly disabled parents or children who are 17+.

Education credits

If you have a child headed to college or are pursuing higher education yourself, check out these tax credits available for education expenses.

The American Opportunity Tax Credit4 (AOTC) provides a tax credit for tuition, fees, and course materials required for college attendance. It's worth 100% of the first $2,000 of qualified education expenses and 25% of the next $2,000 of those expenses, for a maximum of $2,500 per eligible student. Up to $1,000 of the credit is refundable, meaning that if your total tax liability is less than the value of the credit, you can get up to $1,000 back from the IRS. The AOTC is only available for the first four years of undergraduate education, and the student has to be enrolled at least half-time.

The Lifetime Learning Credit5 (LLC) is worth 20% of the first $10,000 of qualified education expense, or a maximum of $2,000 per return. There is no limit to the number of years you can claim the LLC – it can even be used for professional degree courses. However, no portion of the LLC is refundable.

Earned Income Tax Credit

The Earned Income Tax Credit (EITC) can deliver significant tax savings for low- to moderate-income taxpayers. For 2019, the maximum credit ranges from $529 to $6,557, depending on your filing status and how many children you have.6

However, there are a lot of complicated eligibility rules for claiming the EITC.7 If you disregard the rules, you can be banned from claiming the credit for up to ten years.8

These are just a few of the tax deductions and credits available for 2019. If you believe you might qualify for one or more of these tax breaks, take the time to research the rules for claiming them or talk to a tax professional. If you are eligible, you could drastically slash your tax liability and even qualify for a hefty tax refund.

Learn more about 1099s, 1098s, and other tax forms

Important Disclosure Information

This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

  1. Center on Budget and Policy Priorities, "Tax Exemptions, Deductions and Credits," updated June 24, 2019. Accessed September 23, 2019. Back
  2. IRS.gov, "IRS provides tax inflation adjustments for tax year 2019," published November 15, 2018. Accessed September 23, 2019. Back
  3. IRS.gov, "Child Tax Credit and Credit for Other Dependents at a Glance," updated September 12, 2019. Accessed October 25, 2019. Back
  4. IRS.gov, "American Opportunity Tax Credit," updated May 1, 2019. Accessed October 25, 2019. Back
  5. IRS.gov, "Lifetime Learning Credit," updated February 8, 2019. Accessed October 25, 2019. Back
  6. IRS.gov, "2019 EITC Income Limits, Maximum Credit Amounts and Tax Law Updates," updated July 10, 2019. Accessed October 25, 2019. Back
  7. IRS.gov, "Earned Income Tax Credit Rules for Everyone," updated March 1, 2019. Accessed October 25, 2019. Back
  8. IRS.gov, "Consequences of Errors on Your EITC Returns," updated March 29, 2019. Accessed October 28, 2019. Back