5 Valuable Tax Deductions You Should Know About in 2024

At this point, a lot of people are starting to get serious about filing their 2023 taxes. And when doing yours, you may be eager to claim all of the tax deductions you're entitled to.

But first, let's do a quick refresher on tax deductions, since they're often confused with tax credits. A tax credit is a dollar-for-dollar reduction of your tax liability. This means that a $1,000 tax credit is worth the same amount of money to anyone filing a tax return.

A tax deduction, on the other hand, serves the purpose of exempting some of your income from taxes. But your related savings depend on your individual tax bracket.

So let's say you're entitled to a $1,000 tax deduction and fall into the 22% tax bracket. Your deduction will be worth $220 in tax savings. If you're in the 35% tax bracket, that same deduction will be worth $350.

With that out of the way, here are some valuable deductions you may be entitled to claim this year.

1. The mortgage interest deduction

Your mortgage payments themselves are not tax-deductible. Rather, it's the interest on your mortgage that you're able to deduct if -- and this is a big if -- you itemize deductions on your tax return. Actually, most of the items on this list are off-limits if you claim the standard deduction on your taxes.

You can deduct interest on your first $750,000 of mortgage debt ($375,000 if married filing separately) if you signed your home loan on or after Dec. 16, 2017. Otherwise, you can deduct interest on your first $1 million of mortgage debt ($500,000 if married filing separately) if your loan was put in place before that date.

2. The SALT deduction

The SALT, or state and local tax, deduction has a limit of $10,000, and it encompasses state income tax and property taxes. If you itemize on your tax return, you can claim this deduction, but keep in mind that the $10,000 limit includes both income and property tax.

In other words, let's say your state income tax bill in 2023 was $5,200, and you also paid $6,000 in property taxes. You're limited to a total of $10,000 between the two.

3. The medical expense deduction

Racked up a lot of medical bills in 2023? If you're itemizing on your tax return, you can deduct medical expenses exceeding 7.5% of your adjusted gross income (AGI).

Here's how that might work. If your 2023 AGI was $60,000, then medical expenses beyond your first $4,500 in outlays are deductible (since $4,500 is 7.5% of $60,000). So if you incurred $5,000 in medical expenses in 2023, only your last $500 of that total is deductible. The first 7.5% is a wash, so to speak.

4. The educator expense deduction

Teachers commonly dip into their own pockets to purchase classroom materials and supplies. As an educator, you're eligible to deduct up to $300 in such expenses on your 2023 tax return. If you're married to a fellow educator, you can each claim up to $300 for a maximum combined deduction of $600.

What's unique about the educator expense deduction is that normally, the ability to claim deductions in the first place hinges on itemizing on your tax return. But this is one expense you can claim even if you don't itemize.

5. Charitable deductions

Gave money to charity in 2023? If you kept records of those donations and you itemize on your tax return, you can take a deduction for contributions to qualified charities.

And it's not just monetary donations that are eligible for a deduction. If you donated goods, you can claim a deduction for their fair market value -- meaning, their worth at the time of your donation, as opposed to their value when you first purchased them. To be clear, though, you'll need records of the goods you donated, and they must have gone to a registered charity to take a deduction.

In most cases, the deduction for charitable cash contributions is limited to 60% of your AGI. But unless you're in a position to be extremely generous with your money, this cap usually isn't an issue. For context, on a $50,000 salary, you'd have to donate more than $30,000 of your income to exceed that limit.

Clearly, there are many different deductions available that have the potential to save you money. If you're not sure which ones you're eligible to claim, your best bet is to hire a tax professional. They'll be able to tell you not only which deductions you're entitled to, but also, the amounts you should be claiming.