This story is part of Taxes 2022, CNET's coverage of the best tax software and everything else you need to get your return filed quickly, accurately and on-time.
Your federal taxes are due on April 18. Yes, Monday. If you haven't yet filed, there's still time to take advantage of common tax deductions and credits to ensure you get the biggest refund possible. Don't pay more than you're required to -- from the expanded child tax credit to student loan interest deductions, there are many tax breaks you might qualify for that reduce your tax bill or maximize your tax refund.
While the best tax software can help you find any eligible tax deductions and credits, it's a good idea to go into your return already aware of the tax breaks you qualify for. Read on to learn about the 13 biggest tax deductions and credits for 2021 and their eligibility requirements.
Note these tax breaks are focused on taxpayers who are wage earners and not self-employed -- freelancers and small business owners have their own set of tax breaks.
The right tax software can help you find eligible tax breaks
Selecting the best tax software for your situation can help greatly with finding all the deductions and credits that apply to you. Our top choices this year -- TurboTax and H&R Block -- use helpful questionnaires to identify all your possible savings, but you'll need to pay for their expertise. Alternative software option TaxAct costs less and uses a Deduction Maximizer to make sure you don't miss anything important, but it's less polished and lacks the support features of the big two.
You can also file your taxes for free, particularly with Cash App Taxes -- our pick for best free tax software -- but you'll probably need to do some of your own tax research on important credits and deductions to make sure you get the biggest possible refund.
1. Child tax credit
The new child tax credit was made fully refundable in 2021 and increased to up to $3,600 per year per child through age 5, and up to $3,000 per year for children ages 6 to 17. (Parents of newborns born in 2021 can also claim this credit in 2022.) Eligible families automatically received half the total of the payments in advance monthly installments in July through December 2021, unless they unenrolled. When families file their taxes in 2022, they'll get the remainder of the benefit they didn't receive through advance monthly installments. Even if a parent makes little to no income, they are still eligible for the expanded child tax credit, but payment amounts do phase out with higher incomes.
Dependents who are 18 years old can qualify for $500 each. Dependents between the ages of 19 and 24 may qualify as well, but they must be enrolled in college full-time. Eligible dependents include:
- Adopted child
- Foster child
- Niece or nephew
If you received advance payments for the child tax credit this year, you won't be able to claim the full deduction at tax time. The IRS should have sent you Letter 6419 in January 2022 to let you know how much you received in advance child tax credit disbursements and how much you have left to claim. If you opted out of advance payments, you're eligible for the full amount of the credit. If you're not sure where you stand with this credit, you can learn more at the Child Tax Credit Update Portal on the IRS website.
2. Recovery rebate credit (for a missing stimulus payment)
If you never received your third stimulus payment and were eligible or if you weren't paid the full amount, you may be eligible for the Recovery Rebate Credit. Missing first and second payments can only be claimed on your 2020 tax return, but missing third payments can be claimed when you file your 2021 tax return in 2022.
3. Earned income tax credit
The earned income tax credit reduces the amount of taxes owed by low- to moderate-income workers and families. The IRS typically notifies households that might qualify for the EITC, but if you haven't been contacted by the time you sit down to do your taxes, you can check eligibility using the EITC Assistant.
4. Lifetime learning credit
The lifetime learning credit, or LLC, applies to higher education candidates. To claim it, you, your spouse or a dependent must be footing the bill for qualifying higher education costs.
In the 2021 tax season, you could claim the full credit on your 2020 tax return if your modified adjusted gross income was lower than $58,000 -- or a partial credit if your MAGI was between $58,000 and $68,000. When filing jointly, your MAGI had to be under $118,000 for the full credit or between $118,000 and $138,000 for the partial credit. We don't know the exact thresholds for 2021 tax returns, but those numbers were released in January 2022.
This credit is worth 20% of the first $10,000 you pay in qualifying higher education costs, meaning you can earn up to $2,000. The LLC is not refundable, however, which means you can use this credit to lower your tax bill, but you won't receive any money earned in the form of a refund.
5. American opportunity tax credit
The American opportunity tax credit, or AOTC, is exclusively for first-time college students for their first four years of college or other higher education, which makes it different from the LLC (above). If you're pursuing a degree and haven't had a felony drug conviction, you could qualify if you meet income thresholds.
For your 2020 tax return, your modified adjusted gross income could not exceed $80,000 a year in order to claim the full credit and had to be between $80,000 and $90,000 for the partial credit. For joint filers, your MAGI could not exceed $160,000 for the full credit or must have fallen between $160,000 and $180,000 for the partial credit. The exact thresholds for 2021 tax returns were released in January 2022.
The AOTC is worth up to $2,500 (100% of the first $2,000 spent and 25% of the next $2,000 spent on qualifying expenses). This credit is partially refundable -- if deducting this credit brings your tax balance to zero, 40% of the remaining amount of this credit (up to $1,000) may be given back to you as a tax refund.
6. Child and dependent care credit
If you care for a child or another dependent in your household, you may be able to get up to 50% back as a tax break or refund for your child care-related expenses in 2021. The amount you can claim maxes out at $8,000 for one dependent and $16,000 for two or more. To qualify, you'll need to provide proof of your expenses come tax time.
7. Saver's credit
If you make contributions to an individual retirement account or employer-sponsored retirement plan such as a 401(k), you may qualify for the saver's credit. You must be at least 18 years of age, you can't be a full-time student and no one else can claim you as a dependent on their tax return. The amount of the credit depends on your AGI, but can be 50%, 20% or 10% (the maximum you could receive is $1,000 if filing alone or $2,000 if filing jointly). Here are the rates for the 2022 season:
2022 saver's credit threshold
|Credit rate||Head of household||Married (filing jointly)||All other filers (single, married and filing separately, widowed)|
|50% of your contribution||AGI not more than $30,750||AGI not more than $41,000||AGI not more than $20,500|
|20% of your contribution||$30,751 - $33,000||$41,001- $44,000||$20,501 - $22,000|
|10% of your contribution||$33,001 - $51,000||$44,001 - $68,000||$22,001 - $34,000|
|0% of your contribution||more than $51,000||more than $68,000||more than $34,000|
8. Adoption tax credit
There are also benefits available for expenses related to adoption. The adoption tax credit covers adoption fees, court costs, attorney fees, traveling expenses and other expenses that are directly related to adoption.
For the 2021 tax year, the maximum amount is $14,440 per child, up $140 from last year.
9. Medical and dental expenses
Even with insurance, you might have to pay for medical expenses out of pocket. You can deduct these expenses for yourself, your spouse or any of your dependents, as long as the total amount exceeds 7.5% of your AGI. Possible expenses include:
- Fees to doctors, dentists, specialists, mental health professionals and even nontraditional medical practitioners.
- Hospital care, residential nursing home care and acupuncture treatments.
- Treatment for alcohol, drug addiction, smoking-cessation programs and prescription drugs for nicotine withdrawal and related addiction needs.
- Payments for insulin, eyeglasses, contact lenses, hearing aids, crutches, wheelchairs, guide dogs and other service animals.
Funeral expenses, over-the-counter medications and most cosmetic surgery can't be deducted.
10. Residential energy credit
If you're an energy-efficient homeowner, you could claim a residential energy credit. The credit applies to features including:
- Energy-efficient windows and doors
- Energy-efficient heating and AC systems
- Water heaters
- Biomass stoves
- Qualifying solar electric property and solar water heaters
Read more: Electric-Car Tax Credit Issued Improperly to Thousands, Audit Finds
11. Student loan interest deduction
Federal student loans were automatically deferred for all of 2021, but if you paid interest on private loans or resumed federal student loan payments for yourself, your spouse or another dependent, you may qualify for this tax credit. You can claim the deduction as an adjustment to your income rather than an itemized deduction.
For 2020 tax returns, you were able to deduct either $2,500 or the actual amount of interest you paid during the year, whichever is less. We'll update the 2021 tax deduction limits as they become available.
12. Health savings account contribution
If you have a health savings account, contributions made to your HSA are not subject to federal income tax. You can also claim a tax deduction for making contributions to your HSA.
Contribution limits vary by your high-deductible health plan, your age and the date you become eligible. The IRS released an early draft of the 2021 thresholds for HSA contribution deductions, but this information could be updated in early 2022.
13. Charitable contribution deductions
Charitable contributions are one of the most common ways to get a tax deduction. You can deduct contributions of money or property you donated to qualified organizations, but you'll need to itemize your deductions.
In most cases, you can deduct up to 100% of your AGI, but there are some cases where you might be limited to 20% or 30%.