Interested in maximizing your tax savings for the year? There are quite a few new, expanded and lesser-known tax deductions that could help cut down on your taxes owed. Here’s a quick look at five deductions, their key details, and how to know if you could leverage them to save when you file:
Home Improvements: Under the Inflation Reduction Act, home improvement projects that increase energy efficiency could help homeowners save on taxes. The Energy Efficient Home Improvement Credit offers credit for upgrades like energy-efficient windows, water heaters, air conditioning systems and more. Beginning in 2023, this credit will be 30% of the cost of eligible home improvements.
EV Purchases: Electric vehicle (EV) tax credits are also getting an update under the Inflation Reduction Act. An EV tax credit of up to $7,500 for new EVs has been extended until December 2032. Owners of used EVs can take advantage of a separate tax credit that offers up to $4,000 or 30% of the vehicle price.
Reinvested Dividends: Using dividends to reduce taxes is not a new strategy, but it is sometimes overlooked. The IRS considers reinvested dividends as income, but you could be taxed at a lower rate depending on the circumstance.
Affordable Care Act Tax Credits: The Inflation Reduction Act also extended the Affordable Care Act tax credit program through 2025. If you have health insurance through the HealthCare.gov marketplace or state exchange, you could be eligible for a premium tax credit.
Self-Employment Taxes: If you are self-employed, you are solely responsible for paying taxes for Medicare and Social Security, but you are able to deduct 50% of the Federal Insurance Contributions Act tax that you pay.
Tax planning can be complicated. If you have questions about optimizing your finances, get in touch today.