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Top 12 Most popular tax deductions In 2023

You can claim a tax deduction or credit to save on your taxable income. So which approach can benefit you the most? Read on to know more!
tax-deduction
Top 12 Most popular tax deductions In 2023
A tax deduction is an expense that gets reduced from the amount of gross income, thereby lowering your taxable income and tax bill. The total amount of tax you can save depends on the type of tax benefit you claim from or your income tax return bracket.
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A tax break is regarded as an additional benefit provided to individual and corporate taxpayers from the government to lessen their gross tax liability. You can claim a tax deduction or credit to save on your taxable income. So which approach can benefit you the most? 

What is a Tax Deduction?

A tax deduction is an expense that gets reduced from the amount of gross income, thereby lowering your taxable income and tax bill. Therefore, an income tax deduction lessens your overall tax liability. 

The total amount of tax you can save up to depends on the type of tax benefit you claim from or your income tax return bracket.

You, as a taxpayer, have the option to use a tax deduction approach in either of the two ways — Standard tax deduction and Itemized tax deduction.

Standard Tax Deductions for 2022 and 2023

Filing Status2022 Standard Deduction2023 Standard Deduction
Single$12,950$13,850
Married Filing Separately$12,950$13,850
Heads of Household$19,400$20,800
Married Filing Jointly$25,900$27,700
Surviving Spouses$25,900$27,700

What is a Tax Credit?

A tax credit lowers your tax liability on a dollar-for-dollar basis on your tax bill. A tax credit is carried on the final amount of tax you pay after all the deductions are taken off your taxable income.  

Popular Tax Deductions and Credits to Claim

Here’s a list of some common tax deductions and tax credits plans.

Student Loan Interest Deduction

Without itemizing your deductions, you can deduct up to $2,500 from taxable income, if you pay interest on a qualified student loan.

IRA Contributions Deduction

When you plan to save smartly for retirement, you should consider contributing to a traditional IRA. The deduction amount or tax will be dependent on your gross annual income and whether you or your spouse is contributing to any retirement plan at work. 

State and Local Income Taxes Deduction

You may deduct up to$10,000 for a combination of property taxes when you make state or local tax payments (including sales, real estate, and property tax. Select between state and local income taxes or state and local sales taxes, as you can’t opt for both.

Standard Deduction

When you opt for the standard deduction method, the tax deduction depends mostly on your filing status and age, and other factors. For example, in 2022, standard deductions amount were:

  • single and married taxpayers who file separate returns: $12,950
  • married couples filing jointly: $25,900
  • head of household filers: $19,400

Medical Expenses Tax Deduction

To claim this deduction, you have to itemize your tax deduction. You only qualify if your unreimbursed medical expenses are more than 7.5% of your adjusted gross income for the tax year.

Child tax credit

While tax credits can be refundable and non-refundable, you can acquire up to $2,000 per child. Of this, $1,500 of the tax credit is feasibly refundable.

Home Office Tax Deduction

If you’re self-employed and use a part of your home for office and business-related activities, you can claim a home office deduction. The IRS lets you write off associated rent, property taxes, repairs, maintenance, and other related expenses. 

Health Savings Account (HSA) Deduction

This method of deduction is applied when you have a high-deductible health care plan since it is used to save money for medical expenses. 

In 2022, the contribution limit varies:

  • For singles – $3,650, and for families – $7,300.
  • For people above 55 years old – an additional $1000 needs to be contributed.

Charitable Contributions Tax Deduction

Donations or gifts paid by you to any charitable organizations in cash or non-cash format and your contributions will be counted as tax deductible. Typically, you need to itemize your tax deductions but now you can even opt for a standard deduction method to deduct up to 60% of your adjusted gross income. 

Child and Dependent Care Tax Credit

You can generally cover up to 35% of $3000 of expenses for one dependent and $6000 for two or more. It covers tax credits for daycare costs for a child under 13, a spouse, or a parent unable to care for themselves. 

Lifetime Learning Credit

For qualified tuition or education-related expenses, you can claim 20% of the first $10,000 you paid toward tuition and fees, for a maximum of $2,000 depending on your gross income. 

Mortgage Interest Deduction

If you carry a mortgage, you can lower your taxable income by claiming the mortgage interest deduction. If you pay mortgage premiums and interest on your mortgage, you can claim the mortgage interest on all your primary and secondary residences and it can make homeownership more affordable.

Filing income tax returns is mandatory. With proper planning, you can reduce your tax liability and lower your taxable income. Understand how tax break approaches work and learn how to use the opportunity to maximize the value of tax deductions and credits.

File your taxes with Beem. Estimate your Federal and State taxes with Beem’s Tax Calculator. Enjoy tax filing with our 100% accuracy and get the maximum refund. Get started now.

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Picture of Fatema Yusuf

Fatema Yusuf

A passionate writer, who loves to write about anything and everything. She usually writes about finance and investment options. She enjoys talking about personal development and loves to help people grow. she loves to cook for kids and upcycle old stuff to give them a new life.

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This page is purely informational. Beem does not provide financial, legal or accounting advice. This article has been prepared for informational purposes only. It is not intended to provide financial, legal or accounting advice and should not be relied on for the same. Please consult your own financial, legal and accounting advisors before engaging in any transactions.

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