Despite being a difficult time of year, tax season offers opportunities to save money by taking advantage of deductions and credits. Many people are aware of the more well-known tax credits, such as those for education or dependent care, but there are other lesser-known items that can also provide significant tax breaks. Take a look at these unexpected objects that may qualify for tax credits.
Improvements to Your Home That Reduce Energy Use
Significant tax credits can be earned by investing in energy-efficient home improvements. The Residential Energy Efficient Property Credit allows homeowners to recoup a percentage of the costs associated with renewable energy sources such as solar panels, water heaters, wind turbines, heat pumps, and fuel cells. The Nonbusiness Energy Property Credit allows you to reclaim the cost of energy-saving doors, windows, and insulation.
Home Improvement Medical Expenses
You may be eligible for a tax deduction for medically essential home renovations. To address medical needs, changes such as ramps, larger doors, handrails, and lowered cupboards can be deducted as long as they exceed a certain percentage of your adjusted gross income.
Costs of Adoption
The Adoption Tax Credit makes obtaining a child through adoption affordable. Adoptive parents can claim a tax credit for the adoption fee, court costs, attorney fees, and travel expenses directly related to the adoption procedure.
Classroom Materials for Teachers.
The Educator Expense Deduction allows teachers to claim a percentage of the money they spend on school supplies (which they generally pay for out of pocket). Qualified instructors can receive tax benefits for the cost of unreimbursed classroom supplies, computers, books, and other equipment.
Contributions to retirement funds
The Saver’s Credit, also known as the Retirement Savings Contributions Credit, allows low- and middle-income taxpayers to receive refunds on contributions to retirement plans such as 401(k)s or IRAs. This credit, which is equivalent to the amount you contribute to your retirement plan, may offset some of your tax liability.
Spending for Child and Dependent Care
The Child Tax Credit is well-known, whereas the Child and Dependent Care Credit is lesser-known. Claiming a credit for a percentage of qualifying care expenses may assist in covering the costs of child care or care for a dependent with disabilities.
Contributions to a Health Savings Account ($HSA).
HSAs allow you to save money tax-free. Contributions are tax deductible, gains grow tax-free, and reimbursements for qualified medical expenses are not taxed. This has the potential to result in significant reductions in healthcare costs.
Credit for Opportunity to Work.
Businesses that hire members of particular groups who have historically struggled to enter the workforce may be eligible for the Work Opportunity Tax Credit (WOTC). This credit is offered to employers who recruit members of specific groups, such as veterans and individuals on government assistance.
Purchase of Electric Vehicles
The Electric Vehicle Tax Credit is provided to consumers who purchase electric cars (EVs). Depending on the type and year of the vehicle, the tax credit available to buyers of qualifying electric and plug-in hybrid vehicles can be worth thousands of dollars.
A Credit for First-Time Home Buyers
Despite the fact that the First-Time Homebuyer Credit was only a temporary solution during the housing crisis, state and local programs continue to offer incentives and deductions to first-time home buyers. If this is your first home purchase, these incentives may help with the down payment.
You can keep more of your hard-earned money by utilizing tax credits, which dramatically reduce your tax liability. Some credits are well-known, while others go unclaimed because no one knows about them. Investigate and understand these lesser-known tax credits to maximize your tax savings and take full advantage of the benefits available to you. Always consult with a tax specialist to ensure that you qualify and understand how to claim these credits.
