Income tax deductions for the 2023 tax year

A tax deduction or tax credit can help you keep more of your money in your own pocket come tax time. Each directly reduces the amount of taxes you owe, though in different ways. Talk with a tax professional or choose tax software to maximize the eligible deductions you qualify for — and lower what you owe for the 2023 tax year due Monday, April 15, 2024.

What is a tax deduction?

A tax deduction is an amount you can deduct or subtract from your taxable income. The IRS describes a tax deduction as a deduction that lowers the amount of your income before you calculate the tax you owe.

When you hear the term “tax write-off,” it typically refers to a tax deduction.

Eligible taxpayers filing for the 2023 tax year may be eligible for:

• Work-related deductions — more commonly called business expenses.
• Itemized deductions — including property taxes, charitable contributions or mortgage interest.
• Education deductions — student loan interest, work-related educational expenses or teacher educational expenses.
• Healthcare deductions — medical expenses, dental expenses and health savings accounts (or HSAs).
• Investment-related deductions — including IRAs, capital losses and forgiven debt due to foreclosures.

What is a tax credit?

A tax credit is like a payment toward the taxes you owe, reducing your tax bill dollar for dollar. A credit can also increase your tax refund, whether you owe taxes or not.

For example, if you’re eligible for a tax credit of $500 for child care expenses, then your tax bill will be reduced by exactly $500.

Eligible taxpayers filing for the 2023 tax year may be eligible for:

• Family or dependent credits — including the Child Tax Credit, Child and Dependent Care Credit and Earned Income Credit.
• Income and savings credits — including the Saver’s Credit, Foreign Tax Credit or credits for the prior year’s minimum tax.
• Homeowner credits — taxes and residential energy costs for homeowners.
• Electric vehicle credits — reductions under the Inflation Reduction Act of 2022.
• Healthcare credits — or the Premium Tax Credit.

Refundable and nonrefundable credits

There are two major types of tax credits: refundable and nonrefundable.

Refundable credits provide you with cash back if the credit reduces your tax bill to $0 and there’s still money left over. Nonrefundable tax credits reduce your tax bill by the amount owed, providing no refund if your bill is reduced to $0. For example, if you owe $500 but your tax credit is worth $1,000, you don’t receive a refund for the extra $500.

Who is most likely to be researching income tax deductions?

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Standard deductions vs. itemized deductions

US taxpayers have the choice between taking standard deductions or itemizing deductions on their 2023 tax return. The difference comes down to whether you’re better off taking the standard fixed amount available to you as a deduction or listing out in detail what you actually spent on eligible deductible expenses.

Should I itemize or take the standard deduction?

The IRS advises itemizing your deductions if the amount you’re eligible to deduct based on your actual expenses totals more than the standard deductions.

Start by understanding the amount of your standard deductions you’re eligible for. The IRS provides an online tool that walks you through determining your standard deductions.

Then work out your total deductions by itemizing — or listing out — your mortgage interest, property taxes, state income or sales tax, charitable contributions, medical expenses and other eligible expenses.

If the total of your itemized deductions is more than the standard deduction, you may save more money on taxes by itemizing your expenses on your tax return.

Standard deductions for the 2023 tax year

Tax filing status	2023 standard deduction	Change from 2022 tax year
Married filing jointly	$27,700	$1,800 more than 2022 tax year
Head of household	$20,800	$1,400 more than 2022 tax year
Single	$13,850	$900 more than 2022 tax year
Married filing separately	$13,850	$900 more than 2022 tax year

15+ popular tax credits and deductions for individuals

You’ll find many tax credits and deductions available to eligible taxpayers. Confirm eligibility directly with the IRS or through the services of a tax professional.

Popular credits for the 2023 tax year

Credit type	Eligibility	Average credit for 2023 tax year
Earned income tax credit	$600 to $7,430	Depends on 2023 adjusted gross income, filing status and number of claimed dependents
Child and dependent care credit	$3,000 per dependent up to $6,000	Parents, guardians or caretakers for qualifying dependent children ages 0 to 12 or an incapacitated spouse or parent
Child tax credit	Up to $2,000 per child	Parents or guardians or qualifying children ages 0 to 16
Adoption tax credit	Up to $15,950 toward adoption costs, depending on your adjusted gross income	Adoptions finalized in 2023
Saver’s credit	Depends on multiple factors	Eligible 2023 contributions to an IRA or ABLE
Electric vehicle tax credit	Up to $7,500, depending on your car’s battery size	New electric or plug-in vehicles purchased in 2023. If you take possession of a new clean vehicle on or after April 18, 2023, it must meet critical mineral and battery component requirements to qualify for the credit.
American opportunity tax credit	100% of the first $2,000 spent on tuition, books, fees and other eligible costs and 25% of the next $2,000 spent — up to a lifetime credit of $2,500	Eligible undergraduates and their parents who have not claimed the lifetime learning credit
Lifetime learning credit	20% of the first $10,000 spent on tuition, books, fees and other eligible costs — up to $2,000	Eligible undergraduates, graduates and vocational students who have not claimed the American opportunity tax credit

Popular deductions for the 2023 tax year

Deduction type	Eligibility	Average deduction for 2023 tax year
State and local taxes (SALT)	Up to $10,000 (or $5,000 if you’re married and filing separately)	Itemized state and local income or sales tax
Personal property tax	Up to $10,000 (or $5,000 if you’re married and filing separately)	Itemized real estate, cars, boats, planes and land taxes
Charitable contributions	Depends on your donation amount	Qualified contributions to charitable and nonprofit organizations itemized on your return
Gambling loss deduction	Depends on your losses	Qualified gambling losses up to the amount of your winnings claimed and itemized on your return
Mortgage interest deduction	Depends on mortgage tax amount	First $750,000 of your eligible mortgage debt itemized on your return ($375,000 if married filing separately)
Student loan interest	Up to $2,500	Interest paid on your student loan
Teacher educational expenses	Up to $300 — or $600 if married and filing jointly	Unreimbursed classroom expenses
Medical and dental expenses	Depends on amount	Medical and dental expenses that exceed 7.5% of your adjusted gross income
Health savings account contributions	Up to $3,850 for individual plans or up to $7,750 for family plans	100% of your health savings contributions from the income you pay taxes on
IRA contributions	Full or partial deduction for contributions	Depends on your income and whether you or a spouse had access to an employer-sponsored retirement plan
Capital losses	Up to $3,000 — or $1,500 if married and filing separately	Capital losses that were more than your capital gains

How do income tax deductions work in the US?

Your taxable income is the total amount of money you’ve earned that you’re required to pay taxes on. When you claim an expense as a tax deduction, you’re lowering your taxable income and so reducing the amount of tax you’re legally required to pay.

The US uses a system of tiered and progressive tax brackets, with your bracket depending on your total taxable income. In theory, the more money you make, the more taxes you’re required to pay.

Taxable income table for 2023

Here’s what the tax rates look like for single or married individuals filing separately.

Taxable income	Tax on this income
$0 to $11,000	10% of taxable income
$11,001 to $44,725	$1,100 plus 12% of the amount over $11,000
$44,726 to $95,375	$5,147 plus 22% of the amount over $44,725
$95,376 to $182,100	$16,290 plus 24% of the amount over $95,375
$182,101 to $231,250	$37,104 plus 32% of the amount over $182,100
$231,251 to $578,125	$52,832 plus 35% of the amount over $231,250
$578,126+	$174,238.25 plus 37% of the amount over $578,125

What are above-the-line deductions?

Above-the-line deductions are expenses you subtract before calculating the adjusted gross income (AGI). Common deductions include educator expenses, student loan interest, the HSA deduction and the IRA deduction. Below the AGI line are the standard deduction and itemized deductions.

Bottom line

Income tax deductions are designed to lessen the burden of taxes you owe to the government. You may be eligible for work-related, healthcare, education, investment-related and other tax deductions and credits, depending on your filing status. Talk with an accountant or tax professional, or work with trusted tax software that can guide you through filing your income tax return.