In the 2022 tax filing season, over nine million taxpayers missed out on valuable tax benefits simply because they didn’t file a return or were unaware of available credits and deductions.
These overlooked savings included incentives for energy-efficient home improvements, childcare assistance, retirement contributions, and mortgage interest deductions. Staying informed about these opportunities can make a significant difference in reducing tax liabilities and improving financial stability.
Key Takeaways
Over 9 million American taxpayers missed out on valuable tax breaks during the 2022 tax season by not filing returns or by being unaware of available credits and deductions.
- Taxpayers can claim generous credits for installing energy‑efficient home improvements, covering childcare expenses, boosting retirement savings, and deducting mortgage interest.
- Education‑related tax credits, such as the American Opportunity Tax Credit and Lifetime Learning Credit, offer significant financial benefits for students and their families.
- Staying informed about changes in U.S. tax laws is crucial for maximizing deductions and credits, which can reduce tax liabilities and enhance long‑term financial stability.
Tax benefits for energy-efficient home improvements
Homeowners who invest in energy-efficient upgrades can qualify for generous tax credits. The Energy Efficient Home Improvement Credit provides a 30% credit on eligible expenses, with an annual cap of $1,200 through 2032. Qualifying upgrades include high-efficiency windows, exterior doors, insulation, central air conditioners, water heaters, furnaces, and heat pumps. Some major upgrades, such as biomass stoves or boilers, have a higher annual credit limit of $2,000.
Also, the Residential Clean Energy Credit offers a 30% credit for renewable energy investments, including solar panels, wind turbines, and geothermal systems. Unlike the home improvement credit, this one has no annual or lifetime cap and is available through 2032. After that, the percentage will gradually decrease. These incentives not only reduce taxes but also lower long-term energy costs.
Tax credits for childcare and retirement savings
Taxpayers who pay for childcare so they can work or look for work may qualify for the Child and Dependent Care Credit. This credit covers up to 35% of qualifying expenses, though the percentage decreases for those with an adjusted gross income (AGI) above $43,000. At higher income levels, the minimum credit is 20% of expenses. Eligible costs include daycare, babysitters, and even some summer camps.
For those focused on saving for retirement, the Saver’s Credit offers an additional incentive. This credit rewards low- and moderate-income taxpayers who contribute to an IRA, 401(k), or similar retirement account. Depending on income level, the credit can cover up to 50% of contributions. To qualify, individuals must be at least 18 years old, not a full-time student, and not claimed as a dependent on another person’s tax return. This credit effectively boosts retirement savings while reducing tax bills.
Mortgage interest and other overlooked deductions
Homeowners who buy a home using a mortgage can benefit from the mortgage points deduction. Mortgage points, also called discount points, are fees paid to a lender to lower the interest rate on a loan. If the home is used as a primary residence, these points can be deducted in the year they were paid, provided the taxpayer itemizes deductions instead of taking the standard deduction.
Other commonly overlooked deductions include state and local taxes (capped at $10,000 per year) and gambling losses, which can only be deducted up to the amount of reported winnings. These deductions can reduce taxable income and help lower tax liabilities.
Education-related tax benefits
Taxpayers who are paying for higher education—whether for themselves, a spouse, or a dependent—may qualify for valuable education-related tax credits and deductions. The American Opportunity Tax Credit (AOTC) is one of the most beneficial education credits available, offering up to $2,500 per eligible student for tuition, fees, and course materials during the first four years of post-secondary education. Up to 40% of this credit ($1,000) is refundable, meaning taxpayers can receive a refund even if they owe no tax.
For those beyond the first four years of college, the Lifetime Learning Credit (LLC) provides a tax break of up to $2,000 per tax return for tuition and related expenses. Unlike the AOTC, the LLC has no limit on the number of years it can be claimed, making it ideal for graduate students or adults pursuing additional certifications or career training.
Changes in tax laws and staying informed
The tax code changes frequently due to inflation adjustments and new legislation. For example, the Inflation Reduction Act of 2022 expanded tax credits for home energy efficiency, allowing homeowners to claim up to $3,200 annually for qualifying improvements through 2032. Other tax law updates, such as the Tax Cuts and Jobs Act, eliminated certain itemized deductions that were previously available.
To make the most of available tax benefits, taxpayers should stay updated on changing laws. The IRS offers tools like tax calculators and credit eligibility checkers to help determine qualification for various tax breaks. By taking the time to research and claim all eligible deductions and credits, taxpayers can significantly reduce their tax burden and boost their financial security.
Understanding the difference between tax deductions and credits is also crucial. Tax credits directly reduce the tax owed, making them more valuable than deductions, which only reduce taxable income. However, claiming itemized deductions can sometimes mean giving up the standard deduction, so taxpayers should evaluate their options carefully.
Tax benefits for long-term financial success
Missing out on valuable tax breaks can lead to unnecessary financial strain. By taking advantage of energy efficiency incentives, childcare credits, retirement savings contributions, and mortgage deductions, taxpayers can significantly reduce what they owe.
Since tax laws continue to evolve, staying informed is key to maximizing financial benefits. The IRS typically updates tax provisions in mid-autumn each year, making it essential to track any changes that could affect tax planning.
By actively seeking out and claiming available credits and deductions, taxpayers can optimize their financial position, reduce tax burdens, and work toward long-term financial security.
