Tax Tip 2024-01: Tax credits and deductions for individuals

IRS Tax Tips

January 4, 2024

Issue Number:? Tax Tip 2024-01

Tax credits and deductions for individuals

Tax credits and deductions change the amount of a person?s tax bill or refund. People should understand which?credits and deductions?they can claim and the records they need to show their eligibility.

Tax credits
A tax credit reduces the income tax bill dollar-for-dollar that a taxpayer owes based on their tax return.??

Some tax credits, such as the?Earned Income Tax Credit, are refundable. If a person?s tax bill is less than the amount of a refundable credit, they can get the difference back in their refund.

To claim a tax credit, people should:

Keep records to show their eligibility for the tax credits they claim.
Check now to see if they qualify to claim any credits next year on their tax return.

Deductions
Deductions can reduce the amount of a taxpayer's income before they calculate the tax they owe.

Most people take the?standard deduction. The standard deduction changes each year for inflation. The amount of the standard deduction depends on a taxpayer's filing status, age and whether they're blind and whether the taxpayer is claimed as a dependent by someone else.?

Some people must?itemize their deductions, and some people may choose to do so because it reduces their taxable income more than the standard deduction. Generally, if a taxpayer's itemized deductions are larger than their standard deduction, it makes sense for them to itemize.

Interactive Tax Assistant
Find help with tax questions based on specific circumstances with the Interactive Tax Assistant. It can help a person decide if they?re eligible for many popular tax credits and deductions.

?More information:

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Issue Number:? Tax Tip 2024-01