Tax season 2023: 7 deductions that could save you money
Ready or not, tax season is here.
While it may seem tempting to put off preparations until April, getting your taxes increased can help ensure you file a timely return without errors. Plus, you’ll have plenty of time to take advantage of money-saving tax breaks you might be eligible for.
Let’s review the important dates for this year’s tax season:
- January 23, 2023: Tax season officially begins, with the IRS beginning to accept and process tax returns on this date.
- January 31, 2023: This is the deadline for employers to send in W-2s, so keep an eye on your mailbox (or your inbox) if you’re expecting one. This is also when certain 1099 forms are submitted.
- February 15, 2023: For taxpayers who elected to claim an exemption from their employer’s withholding tax last year, which is done by filing a Form W-4, this is the deadline to file again. For Turbocharge“You would file this exemption request if you expect to have no tax liability this year and you did not have any the prior year.”
- April 18, 2023: Tax day! Make sure you have filed your tax return by this date or file Form 4868 requesting an extension.
Here are seven tax breaks that could save you money when you file your return this year.
Charitable Out-of-Pocket Deductions
While you may already factor in the large charitable donations you make throughout the year, you may overlook the smaller ones, and those can add up. It doesn’t even necessarily have to be a direct donation, since kiplinger notes “You can write off out-of-pocket expenses you incur while working for a charity,” like ingredients for a meal or postage.
Please note that if your contribution totals $250 or more, you will need to obtain an acknowledgment from the charity that supported it.
A gambling loss doesn’t have to be a total washout, thanks to this tax break. Your deduction is limited to the amount of earnings you report as taxable income or, as nerdwallet puts“[y]You can’t deduct more than the amount you earn.”
You’ll also need to itemize deductions to get this gambling loss tax exemption, so be sure to save your receipts. You may also consider keeping a detailed log of your gaming activity for review if necessary.
Child and Dependent Care Credit
As any parent knows, child care isn’t cheap. This tax credit, the child and dependent care credit, can help you cover the cost of caring for your children or other dependents, such as an elderly parent. By 2022, you could receive a non-refundable tax credit of up to 35 percent, or $3,000, of qualified expenses for one child under age 13 (it’s up to $6,000 for two or more qualifying children).
There are requirements you’ll need to meet to qualify, including modified adjusted gross income for the year and the child’s or dependent’s living arrangements. According to US news and world reportWhat’s key to note is that this credit is “available to those who pay for child care so they can work,” which means you’ll need earned income to qualify.
Social Security taxes you pay when you’re self-employed
Self-employed individuals who cover the entire 15.3 percent of Social Security and Medicare taxes out of pocket “instead of splitting it 50-50 with an employer” Explain kiplinger, they can cancel half of the amount they pay. Even better? You do not have to itemize your deductions to get this tax break.
If you refinanced your mortgage in 2022, you may be able to deduct points from the new loan. However, this works a little differently than it did when you first got your mortgage.
With a refinance, you can deduct points over the life of the loan; For example, you could deduct 1/30 of the points each year for a 30-year mortgage, for a total of $33 per year for every $1,000 you paid in points. When you pay off the loan, you’ll be able to deduct all the points you didn’t already have. deducted.
Lifetime Learning Credit
You can take advantage of the lifetime learning credit to offset the higher education costs of your children, your spouse, or even yourself. This could include the cost of classes at a community college or vocational school, and according to US news and world report“[t]There is no limit to the number of years someone can receive a lifetime learning credit.” The credit is up to $2,000 annually, though the right to claim it phases out at certain income levels.
Student loan interest paid by a parent
Even if your parent is the one paying off your student loan debt, you may be able to claim a deduction. That’s because the IRS looks at those parental payments “as if the money was given to the child, who then paid the debt.” kiplinger Explain. Assuming the child is no longer claimed as a dependent, they can deduct up to $2,500 in student loan interest a year paid by their parents.
Becca Stanek has worked as an editor and writer in the personal finance space since 2017. She previously served as managing editor of investing and saving content at LendingTree, editor at SmartAsset, and staff writer for The Week. This article is based in part on information first published on The Week’s sister site, kiplinger.es
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