The IRS adjusts federal income tax brackets and standard deduction amounts each year to account for inflation. For the 2025 tax year, most taxpayers will benefit from slightly higher deduction amounts and wider tax brackets.

Tax deductions and tax credits both help reduce your tax bill, but they work differently.

• Tax deductions reduce the amount of income that is subject to tax.
• Tax credits directly reduce the amount of tax you owe, making them especially valuable.

Here are several deductions and credits you may qualify for when filing your 2025 return.

There is a big difference between deductions and credits. While both help lower your tax bill, deductions are used to reduce the amount of taxable income. Deductions net you a savings of what would have been paid in tax on the deduction amount. On the other hand, tax credits are amounts actually subtracted from your tax bill. Here are some of each you might be able to take in 2024.

If you itemize deductions, you may deduct eligible charitable donations made to qualified nonprofit organizations during the 2025 tax year. In most cases, cash contributions are deductible up to 60% of your adjusted gross income (AGI), subject to IRS rules.

If you incurred significant out-of-pocket medical expenses during 2025, you may be able to deduct qualifying expenses that exceed 7.5% of your adjusted gross income (AGI), provided you itemize deductions.

For example, if your AGI is $100,000, medical expenses exceeding $7,500 may qualify for a deduction.

If you're self-employed or own a small business, you may qualify for a variety of deductions that can significantly lower your taxable income. Common deductions include:

• Home office expenses
• Business mileage and travel
• Office supplies and equipment
• Professional education
• Health insurance premiums (if eligible)
• Retirement plan contributions

Proper recordkeeping is essential to maximize these deductions while remaining compliant with IRS requirements.

The Earned Income Tax Credit is a refundable tax credit designed to assist low- and moderate-income workers.

Eligibility depends on your income, filing status, and number of qualifying children. Because the income limits increase periodically with inflation, many taxpayers who didn't qualify in previous years may now be eligible.

Eligible taxpayers may claim a Child Tax Credit of up to $2,000 per qualifying child under age 17, subject to income limitations and current IRS guidelines.

If you paid for childcare or care for a qualifying dependent so you could work or look for work, you may qualify for the Child and Dependent Care Credit. Eligible expenses can include:

• Daycare
• Preschool
• Before- and after-school care
• Summer day camps
• In-home care for qualifying dependents

Taxpayers pursuing higher education may qualify for one of two education credits.

American Opportunity Tax Credit (AOTC)

• Worth up to $2,500 per eligible student
• Available for the first four years of higher education
• Covers qualified tuition, fees, books, and certain course materials

Lifetime Learning Credit (LLC)

• Worth up to $2,000 per tax return
• Available for undergraduate, graduate, professional, and career development courses
• No limit on the number of years it can be claimed

You cannot claim both credits for the same student during the same tax year.

Several energy-related tax incentives remain available under current federal law.

Depending on eligibility requirements, taxpayers may qualify for credits related to:

• Certain new or previously owned clean vehicles
• Residential solar energy systems
• Energy-efficient windows and doors
• Heat pumps
• Qualified insulation and other home energy improvements

Eligibility requirements, income limits, and vehicle sourcing rules can affect whether a credit is available, so it's important to review the latest IRS guidance before claiming these incentives.

Plan Ahead for a Better Tax Outcome

While tax season often focuses on filing last year's return, it's also an excellent time to begin planning for the future. Reviewing your withholding, maximizing retirement contributions, organizing deductible expenses, and discussing tax-saving strategies before year-end can help reduce surprises next tax season.

Every taxpayer's situation is unique, and even small changes in tax law can have a meaningful impact on your return.

At Sloan, our experienced tax professionals stay current on the latest IRS regulations and legislative changes so you don't have to. We're available year-round to answer your questions, help you prepare for upcoming tax seasons, and identify opportunities to reduce your overall tax liability.

Whether you need assistance with a straightforward return or more complex tax planning, our team is here to provide personalized guidance and dependable service every step of the way.

Sources: irs.gov, kiplenger.com, cnbc.com