Tax Adjustments, Itemized Deductions, and Credits: Comprehensive Guide for Students and Taxpayers

Adjustments to income

Include student loan interest for higher education,

military reservists' travel expenses,

contributions to retirement accounts,

flexible spending accounts,

alimony paid if the divorce agreement was final before 2019,

$300 for teachers who purchase classroom supplies, moving expenses of military members,

and certain expenses of self-employed people.

Six categories of itemized deductions:

1. Medical and dental expenses

2. Taxes you paid

3. Interest you paid

4. Gifts to charity

5. Casualty and theft losses

6. Other itemized deductions

1. Medical and Dental Expenses (Not Paid by Insurance) in Excess of 7.5 Percent of Adjusted Gross Income

-Medicine and drugs

-Insurance premiums for medical and long-term care

-Medical services (doctors, dentists, nurses, hospitals, long-term health care, acupuncture, chiropractor)...

-Mileage traveled to medical appointment

-Sterilizations and prescription contraceptives

-Disability-related home or vehicle modifications

-Addiction treatment, lead paint removal, a guide dog

-Costs of a physician-prescribed course of treatment for obesity

-Expenses for prescription drugs/programs to quit smoking

-Medical equipment and aids (contact lenses, eyeglasses, hearing devices, orthopedic shoes, false teeth, wheelchair lifts)

-Fees for childbirth preparation classes

-Costs of school for disabled person

-Travel and conference registration fees for a parent to learn about a child’s disease

-Nursing home expenses

-Transportation costs to and from locations where medical services are obtained

Taxes You Paid

Includes state and local real estate taxes, personal property taxes, and state and local income or sales taxes, limited to a maximum of $10,000.

Interest You Paid

Includes points treated as prepaid interest, interest on home loans up to $750,000, and interest on loans used for investments.

Gifts to Charity

Cash donations limited to 60% of AGI, noncash contributions at fair market value, mileage allowance for volunteer work, and contributions from IRA for those aged 70½ or older.

Casualty and Theft Losses

Losses not paid by insurance, reduced by $100 and then by 10 percent of AGI, must be from a federally declared disaster.

Other Itemized Deductions

Includes gambling losses to the extent of gambling winnings and losses from partnerships or S corporations.

Nonrefundable tax credit

May reduce tax liability to zero but not below; no refund for the difference if the credit exceeds the tax owed.

Refundable tax credit

Can reduce tax liability below zero, with the excess refunded; often subject to income limits.

Health Insurance Premium Tax Credit (HIPTC)

Provides a tax credit to help individuals and families afford health insurance coverage; refundable.

American Opportunity Tax Credit (AOTC)

Up to $2,500 per tax credit to help defray college expenses for the first four years of postsecondary education.

Hope Scholarship Credit

Up to $2,500 per person in tax credits for those who have not yet finished four years of college.

Lifetime Learning Credit (LLC)

Credit may be claimed every year for tuition and related expenses, up to a maximum of $2,000.

Earned Income Tax Credit (EITC)

Refundable credit for low-income workers with qualifying children or, in certain cases, childless workers; maximum credit is $7,430.

Child and Dependent Care Credit

Non-refundable credit for workers paying care expenses for children under age 13; maximum $4,000 for one dependent.

Child Tax Credit

$2,000 per qualifying child (age 16 or younger), refundable up to $1,600.

Adoption Credit

Nonrefundable credit up to $15,950 for qualifying costs of an adoption.

Mortgage Interest Credit

Nonrefundable credit of up to $2,000 for mortgage interest paid under special programs.

Retirement Savings Contribution Credit

Nonrefundable credit of up to $1,000 to promote savings in lower-income households.

Elderly or Disabled Tax Credit

Nonrefundable federal tax credit for individuals age 65 or older or permanently disabled, between $3,750 and $7,500.

Residential Energy Credit

Credit equal to 30% of the cost of qualifying equipment, up to $1,200 per year.