Here are a few facts about credits and deductions that can guide you through your year-round tax preparation:
- Taxable income remains after someone subtracts any eligible deductions from their adjusted gross income, including the standard deduction. Some taxpayers may itemize their deductions to reduce their adjusted gross income.
- The Tax Cuts and Jobs Act changed itemized deductions. In comparing these changes, many individuals accustomed to itemizing may find it more beneficial to take the standard deduction.
- Generally, if a taxpayer’s itemized deductions are more significant than their standard deduction, they should itemize. Depending on the situation, some taxpayers may even be required to itemize.
Taxpayers can subtract tax credits from the total amount of tax they owe. To claim a credit, taxpayers should keep records demonstrating their eligibility. Some major tax credits include the child tax credit, the child and dependent care credit, the American opportunity credit or lifetime learning credit, and the earned income tax credit.
*This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov8
Footnotes and Sources
- IRS.gov, March 1, 2023
