You can claim two broad categories of tax breaks: deductions that reduce the income you’re taxed on, and credits that directly reduce the tax you owe. Some deductions are available to every filer automatically, others require you to list expenses individually, and a handful can be taken no matter which route you choose. Credits range from a few hundred dollars for retirement savers to thousands for parents and college students. Here’s a breakdown of everything worth knowing about.
The Standard Deduction
Every taxpayer gets to choose between the standard deduction and itemizing individual expenses. Most people take the standard deduction because it’s simpler and, for many households, larger than what they could piece together from receipts. For the 2026 tax year, the standard deduction is $16,100 for single filers, $32,200 for married couples filing jointly, and $24,150 for heads of household. If you’re 65 or older or blind, you get an additional amount on top of those figures.
The decision is straightforward: add up your itemizable expenses (covered below), and if the total exceeds your standard deduction, itemize. If not, take the standard deduction and move on.
Itemized Deductions
Itemizing means listing specific expenses on Schedule A instead of taking the flat standard deduction. The major categories include:
- Medical and dental expenses that exceed 7.5% of your adjusted gross income. If your AGI is $60,000, only the portion of medical bills above $4,500 counts. Routine copays and insurance premiums you already paid with pre-tax dollars don’t qualify.
- State and local taxes (SALT), including state income tax or sales tax and property tax. The combined deduction for these is capped at $10,000 per return.
- Mortgage interest on up to $750,000 of home loan debt. Your lender sends you a Form 1098 each year showing exactly how much interest you paid.
- Charitable contributions to qualified nonprofits. Cash donations are generally deductible up to 60% of your AGI. Donated vehicles, boats, or other property have their own rules and paperwork.
- Casualty and theft losses from a federally declared disaster, after subtracting insurance reimbursements.
Homeowners with large mortgages and people who live in states with high income or property taxes are the most likely to benefit from itemizing. If your mortgage interest and SALT alone approach your standard deduction, it’s worth running the numbers.
Deductions You Can Claim Without Itemizing
Some deductions, often called “above-the-line” adjustments, reduce your adjusted gross income regardless of whether you itemize. These are especially valuable because a lower AGI can also help you qualify for other credits and deductions that phase out at higher incomes.
- Student loan interest: You can deduct up to $2,500 in interest paid on qualified student loans. The deduction phases out at higher income levels based on your filing status.
- Traditional IRA contributions: Contributions up to $7,000 (or $8,000 if you’re 50 or older) may be fully or partially deductible. If you or your spouse have access to a workplace retirement plan, the deduction starts phasing out above certain income thresholds.
- Health Savings Account contributions: If you have a high-deductible health plan, contributions to an HSA are deductible and the money grows tax-free when used for medical expenses.
- Educator expenses: K-12 teachers who work at least 900 hours during the school year can deduct up to $300 for classroom supplies, books, computer equipment, and software they paid for out of pocket.
- Self-employment tax: If you’re self-employed, you can deduct the employer-equivalent portion of your self-employment tax (roughly half) from your income.
- Self-employed health insurance premiums: Freelancers and business owners who pay for their own health coverage can deduct those premiums.
- Penalties for early withdrawal of savings: If a bank charged you a penalty for breaking a CD early, that amount is deductible.
You claim these adjustments on the first page of your Form 1040, and they reduce your income before you even get to the standard-deduction-or-itemize decision.
Tax Credits for Families
Credits are more powerful than deductions dollar for dollar. A $2,000 deduction might save you $440 in taxes (at a 22% rate), but a $2,000 credit saves you exactly $2,000. Some credits are refundable, meaning they can put money in your pocket even if you owe no tax at all.
The Child Tax Credit provides up to $2,200 per qualifying child for the 2025 tax year. A refundable portion, the Additional Child Tax Credit, allows you to receive up to $1,700 per child as a refund if the credit exceeds what you owe. Children generally must be under 17, have a Social Security number, and live with you for more than half the year.
The Child and Dependent Care Credit helps cover the cost of daycare, after-school programs, or care for a dependent while you work or look for work. The credit is a percentage of your care expenses, and the percentage scales with your income.
The Earned Income Tax Credit is designed for low-to-moderate-income workers and can be substantial, especially for families with multiple children. It’s fully refundable. The exact amount depends on your income, filing status, and number of qualifying children, and it’s worth checking even if you think your income is too high, because the eligibility range is wider than many people expect.
Education Credits
The American Opportunity Tax Credit covers up to $2,500 per year in college costs for each eligible student. It equals 100% of the first $2,000 in qualified tuition and fees plus 25% of the next $2,000. Up to $1,000 of the credit is refundable, so it can generate a refund even if your tax bill is zero. You can claim it for up to four years of undergraduate education per student. To qualify for the full credit, your modified adjusted gross income must be $80,000 or less ($160,000 for joint filers). The credit phases out completely above $90,000 ($180,000 for joint filers).
The Lifetime Learning Credit covers up to $2,000 per tax return for tuition and related expenses at eligible institutions. Unlike the American Opportunity Credit, it isn’t limited to undergraduates or the first four years of school, so it works for graduate courses, professional development, and even single classes. It’s not refundable, though, so it can only reduce your tax bill to zero.
Retirement Savings Credits
Beyond the IRA deduction mentioned earlier, there’s a separate credit specifically for lower-income savers. The Saver’s Credit gives you up to $1,000 ($2,000 if married filing jointly) for contributing to an IRA or employer-sponsored retirement plan like a 401(k). The credit rate depends on your income and filing status, and it’s available on top of any deduction you take for the same contribution. It’s a powerful but often overlooked incentive to put money away for retirement.
Health Insurance Credits
If you buy health insurance through the Health Insurance Marketplace (the federal or state exchange), you may qualify for the Premium Tax Credit. This refundable credit is based on your household income and the cost of your plan. Many people take it in advance as a monthly reduction in their insurance premiums, but you can also claim the full amount when you file your return.
Self-Employment and Business Deductions
Freelancers, gig workers, and small business owners report income and expenses on Schedule C. You can deduct any ordinary and necessary expense related to running your business, which directly reduces the profit you’re taxed on. The IRS breaks these into specific categories:
- Advertising and marketing
- Car and truck expenses for business use (tracked by mileage or actual costs)
- Office supplies and equipment
- Software and subscriptions
- Contract labor (payments to freelancers or subcontractors)
- Professional services like legal or accounting fees
- Business insurance
- Rent for office space or leased equipment
- Travel expenses for business trips (transportation, lodging)
- Business meals (typically 50% deductible)
- Utilities, repairs, and maintenance
If you use part of your home exclusively and regularly for business, you can also deduct a portion of your rent or mortgage interest, utilities, and insurance through the home office deduction. The simplified method lets you deduct $5 per square foot of office space, up to 300 square feet ($1,500 maximum). The regular method uses your actual expenses prorated by the percentage of your home dedicated to business.
Large equipment or asset purchases can often be deducted in full the year you buy them using the Section 179 deduction, rather than spreading the cost over several years through depreciation. This is useful for things like computers, furniture, vehicles used for business, and machinery.
Other Credits Worth Checking
The Adoption Tax Credit reimburses qualifying adoption expenses up to $17,280 per eligible child (2025 figure), with up to $5,000 of that refundable. Qualifying expenses include adoption fees, court costs, attorney fees, and travel costs related to the adoption.
Energy-related credits are available for homeowners who install solar panels, heat pumps, energy-efficient windows, or other qualifying improvements. The Residential Clean Energy Credit covers 30% of the cost of solar electric systems, solar water heaters, and battery storage with no dollar cap. The Energy Efficient Home Improvement Credit covers 30% of eligible upgrades like insulation, exterior doors, and heat pumps, with annual limits that vary by category.
The Fuel Tax Credit applies if you purchased fuel for off-highway business or farming purposes. It’s niche, but if you run a farm or operate equipment off public roads, it can add up.
How to Decide What to Claim
Start by gathering your income documents (W-2s, 1099s) and any records of deductible expenses. Then work through this order: first, take every above-the-line deduction you qualify for, since those benefit you regardless. Next, compare your total itemizable expenses against your standard deduction and pick whichever is larger. Finally, go through the credits. Credits apply after your tax is calculated, and the refundable ones can still pay out even if your tax bill has already hit zero.
Tax software walks you through each of these categories and flags credits you might miss. If your situation is simple (W-2 income, standard deduction, maybe a child or student loan), filing takes an hour or two. If you’re self-employed or have a mix of income sources, set aside more time to organize your expense records, but the payoff in lower taxes is usually well worth it.