Most common tax deductions

Published
  • November 02 2016, 4:55am EDT

If you're Donald Trump, you can turn a $900 million loss into a 20-year tax plan. If you're a Fortune 500 company, you may be able to avoid taxes altogether. But if your clients are regular people (i.e, mass-affluent), they are looking at an array of possible tax deductions. Scroll through to see which deductions are the most commonly used on all U.S. tax returns. This comes from a combination of sources: the Tax Policy Center, Zacks Investment Research and the IRS.

Earned income tax credit

The earned income tax credit, EITC or EIC, is a benefit for working people with low to moderate income. EITC reduces the amount of tax they owe and may offer them a refund. To qualify, taxpayers must meet certain requirements and file a tax return, even if they do not owe any tax or are not required to file.

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Child tax credit

This credit is for clients who have a qualifying child. It can be claimed in addition to the credit for child and dependent care expenses.

Nonrefundable education credit

Education tax credits can help offset the costs of education. Education tax credits can either be refundable or nonrefundable.

A nonrefundable tax credit can reduce the amount of tax clients owe to zero, but does not pay anything beyond this amount. Clients must owe tax to benefit from a nonrefundable tax credit, and the amount cannot exceed their tax burden.

A refundable tax credit allows clients to get money back from the government even if they owed nothing in taxes. If their tax liability is zero or even if they didn't earn any income, they may get money from the IRS if they qualify for a refundable tax credit.

American opportunity tax credit

American opportunity tax credit is a credit for qualified education expenses paid for an eligible student for the first four years of higher education. Clients can get a maximum annual credit of $2,500 per eligible student. If the credit brings the amount of tax they owe to zero, they can have 40% of any remaining amount of the credit (up to $1,000) refunded to them.

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Foreign tax credit

If client paid or accrued foreign taxes to a foreign country or U.S. possession and are subject to U.S. tax on the same income, they may be able to take either a credit or an itemized deduction for those taxes. They can claim a credit only for foreign taxes that are imposed on them by a foreign country or U.S. possession. Generally, only income, war profits and excess profits taxes qualify for the credit.

Retirement savings contributions credit (or saver’s credit)

Clients may be able to take a tax credit for making eligible contributions to their IRA or employer-sponsored retirement plan. The amount of the credit is 50%, 20% or 10% of their retirement plan or IRA contributions, up to $2,000 ($4,000 if married filing jointly).

Child care credit

Clients may be able to claim the child and dependent care credit if they paid expenses for the care of a qualifying individual to enable them (and their spouse, if filing a joint return) to work or actively look for work. They may not take this credit if their filing status is married filing separately. The amount of the credit is a percentage of the amount of work-related expenses clients paid to a care provider for the care of a qualifying individual. The percentage depends on their adjusted gross income.

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Miscellaneous tax deductions

1.6% Residential energy credit

.3% General business credit

0% Elderly disabled credit