Deductions & Credits

An amount that lowers the portion of your income subject to tax, which usually means a smaller tax bill or bigger refund. On a federal return you choose one of two paths: the standard deduction, a fixed amount set by the IRS based on filing status, or itemized deductions, where you list specific approved expenses like mortgage interest, state and local taxes, and charitable giving. You can’t do both, so the goal is picking whichever gives the bigger deduction.

A federal tax benefit that helps families offset the cost of raising children, worth up to $2,200 per qualifying child for the 2026 tax year. It reduces the tax you owe on a dollar-for-dollar basis, and its refundable portion, the Additional Child Tax Credit, can provide up to $1,700 per child as a refund if your tax liability is lower than the credit. Eligibility depends on the child’s age, residency, and Social Security Number, along with income phase-out limits.

A refundable tax credit for low- and moderate-income working individuals and families that can reduce your tax bill to zero and refund any excess. Its size depends on your earned income, family size, and filing status, generally growing with lower income and more qualifying children. Unlike a deduction, which lowers taxable income, it reduces your tax liability dollar for dollar and requires earned income like wages, salary, or self-employment income to qualify.

n federal tax terms, this refers to certain state and local taxes you may deduct if you itemize on Schedule A, generally state and local income taxes or general sales taxes (not both), plus real property taxes. The deduction reduces your taxable income rather than your tax bill dollar for dollar, and only helps if itemizing beats the standard deduction. It is subject to a cap, which for 2025 returns increased to $40,000 with a phase-down for higher incomes.

A federal program, also called the Investment Tax Credit, that lets homeowners reduce their tax liability by a percentage of the cost of installing a solar energy system. As of 2024 it is 30% of the total installation cost, covering panels, inverters, battery storage, labor, and permits. You claim it with IRS Form 5695, and if the credit exceeds your tax bill, the remainder can carry over to future years.

A tax deduction for contributions of money or property made to a qualified charitable organization, such as certain religious groups, nonprofits, and governments for public purposes. Gifts to individuals, political organizations, and many foreign organizations generally don’t qualify. It usually requires itemizing on Schedule A and reduces taxable income rather than cutting your tax bill dollar for dollar, subject to documentation rules and AGI limits.