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Tax Deductions: The Most Common Tax Breaks For 2022

Hanna Kielar8-minute read
April 18, 2022

When tax season comes around, you want to file out your tax return with confidence. That’s why it’s important to understand what tax deductions are and how they affect your taxable income.

Read on to learn more about how deductions can help keep more money in your pocket this tax season.

What Is A Tax Deduction?

A tax deduction, also called a tax break or write-off, is an expense that can be subtracted from your taxable income to reduce your tax bill. When your taxable income is lower, your tax bill is lower, too. The Internal Revenue Code, also called the Tax Code, defines a wide variety of deductions that U.S. taxpayers can take.

These deductions are mainly designed to incentivize certain types of behaviors, like buying a home, advancing your career or donating to charity.

Deductions can also help create your adjusted gross income (AGI), which is used to determine your taxable income.

Tax Deduction Vs. Tax Credit

A tax deduction lowers the amount of your income that’s subject to taxes, while a tax credit reduces the amount you owe in. Tax credits directly reduce your tax liability.

Think of tax deductions like store coupons, which reduce your bill, and tax credits as store credits, which pay your bill. A tax credit that exceeds the tax bill will be refunded to the taxpayer, while deductions can’t reduce the tax bill to below zero.

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How Do Tax Deductions Work?

There are two main ways for taxpayers to take advantage of tax deductions: either by taking the standard deduction or by itemizing deductions. You must choose one or the other; you cannot choose to do both.

The Standard Deduction For 2022

The standard deduction is a flat deduction that can be taken by anyone, regardless of whether they actually spent money on deductible items. Those who elect to take the standard deduction typically don’t have to worry about an IRS audit.

The amount of that deduction varies according to filing status. Filers over the age of 65 or who are legally blind get a larger standard deduction.

Here’s the standard deduction for the 2022 filing year (or the 2021 tax year) compared to filing in 2021.

Filing Status

2021 Standard Deduction

2022 Standard Deduction

Single

$12,550

$12,950

Married, Filing Separately

$12,550

$12,950

Married, Filing Jointly

$25,100

$25,900

Head of Household

$18,800

$19,400

For many filers, taking the standard deduction is often the best route since individual deduction totals will typically not exceed the standard deduction.

Itemizing Deductions

For single or married filers whose individual deductions exceed the standard deduction, itemizing may be more beneficial. Filers who wish to itemize deductions will need to complete IRS Form 1040 Schedule A for most deductions. There are additional forms for certain deductions, like student loans.

Form 1040 Schedule A will list specific deductions you can make. On each line of the expense you choose to deduct, you’ll write the amount you spent. At the end of the form, you’ll add all the expenses together to get your total.

Remember, your goal is to lower your taxable income. To do that, you’ll want to take whichever deduction, standard or itemized, is larger. The higher the deduction, the more you can decrease your taxable income.

Keep in mind, too, if you’re hiring a tax professional to do your taxes, it will cost more for them to itemize your deductions. You’ll also need to have physical proof (like receipts) of the expenses you’re deducting from your taxes.

What Are The Most Common Tax Deductions?

In addition to deductions, you’ll also want to consider the tax credits you may qualify for when filing your taxes. Review a list of the most common tax credits below.  

Earned Income Tax Credit

The Earned Income Tax Credit (EITC) allows qualifying filers to claim a minimum of $1,502 and a maximum of $6,728 depending on the number of children they have. Filers must also have an AGI under $57,414.

Child Tax Credit

The Child Tax Credit was introduced to help support families with children. The credit can help eligible tax filers earn up to $3,600 per child.

Adoption Credit

This credit allows taxpayers to claim $14,440 for adoption costs per eligible child. These expenses can include necessary adoption fees, legal fees, travel-related expenses and other costs directly related to the adopted child.

Saver’s Credit

You may be eligible for the saver’s credit if you make contributions to an employer retirement plan, like a 401(k) or 403(b), individual retirement arrangement (IRA) or other specific retirement plans.

Depending on your filing status and AGI, the amount of the credit you earn may be 10%, 20% or 50% of your retirement contributions. The maximum contribution amount that may qualify for the credit is $2,000, or $4,000 if married filing jointly.

How Can I Maximize My Tax Deductions?

To maximize the deductions on your tax return, you’ll want to take advantage of every possible deduction and credit that you’re eligible for. Make sure that you keep appropriate documentation for any and all deductions that you claim on your tax return. For example, you’ll want to keep all medical bills, records of charitable donations, receipts and other monetary information.

The Bottom Line

Tax deductions lower your taxable income so that you have a lower tax bill. Understanding the deductions and credits that are applicable to you can help save and even earn you money this tax season.

To get the most out of your tax deductions, speak with a finance or tax professional. Are you ready to file your taxes? Review this year’s tax brackets to learn more about relevant deductions, credits and tax rates.  

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Hanna Kielar

Hanna Kielar is a Section Editor for Rocket Auto℠, RocketHQ℠, and Rocket Loans® with a focus on personal finance, automotive, and personal loans. She has a B.A. in Professional Writing from Michigan State University.