Tax season can be stressful for many middle-class Americans, but it’s also an opportunity to save money through various tax breaks. Unfortunately, many taxpayers miss out on these savings simply because they’re unaware of the deductions and credits available to them. The tax code is complex, and it’s easy to overlook benefits that could put more money back in your pocket.
In this blog, I’ll reveal 14 tax breaks that middle-class taxpayers often miss.
Saver’s Credit
The Saver’s Credit is a tax break designed to encourage low and middle-income taxpayers to save for retirement. If you contribute to a retirement account like a 401(k) or IRA, you may be eligible for a credit of up to 50% of your contributions. The credit amount depends on your income and filing status. Many people overlook this credit because they assume it’s only for low-income individuals, but it can benefit many middle-class taxpayers as well.
Child and Dependent Care Credit
If you pay for childcare or care for a dependent adult while you work, you might be eligible for the Child and Dependent Care Credit. This credit can cover up to 35% of your care expenses, with a maximum credit of $3,000 for one dependent or $6,000 for two or more. The credit percentage decreases as your income increases, but many middle-class families still qualify for significant savings. Keep receipts and records of your care expenses to claim this credit.
American Opportunity Tax Credit
The American Opportunity Tax Credit is available for students in their first four years of post-secondary education. It provides a credit of up to $2,500 per eligible student for qualified education expenses. What many people don’t realize is that if the credit brings your tax liability below zero, you can have 40% of the remaining credit (up to $1,000) refunded to you. This can be a significant benefit for middle-class families with college students.
State and Local Tax Deduction
The State and Local Tax (SALT) deduction allows you to deduct state and local income, sales, and property taxes from your federal taxes. While there’s currently a $10,000 cap on this deduction, it can still provide significant savings for many middle-class taxpayers. Be sure to keep records of your state and local tax payments throughout the year to maximize this deduction.
Health Savings Account Contributions
If you have a high-deductible health plan, contributions to a Health Savings Account (HSA) are tax-deductible. Many people don’t realize that HSA contributions reduce your taxable income even if you don’t itemize deductions. The funds in an HSA can be used tax-free for qualified medical expenses, and any unused funds roll over year to year. This can be a powerful tool for both current tax savings and future healthcare costs.
Mortgage Interest Deduction
Homeowners can deduct the interest paid on their mortgage for their primary residence and one additional home. While recent tax law changes have reduced the benefit for some, many middle-class homeowners can still save significantly with this deduction. The deduction applies to mortgages up to $750,000 for homes purchased after December 15, 2017. Be sure to receive and keep your Form 1098 from your mortgage lender to claim this deduction.
Charitable Contributions
Donations to qualified charities can be deducted from your taxes if you itemize deductions. Many middle-class taxpayers overlook smaller donations or non-cash contributions throughout the year. Keep records of all charitable giving, including receipts for donated items.
Educator Expenses Deduction
Teachers and other educators can deduct up to $250 of unreimbursed expenses for classroom supplies. This is an “above-the-line” deduction, meaning you can claim it even if you don’t itemize. Eligible expenses include books, supplies, computer equipment, and other materials used in the classroom. If both spouses are educators, they can each claim the deduction, potentially saving up to $500.
Student Loan Interest Deduction
If you’re paying off student loans, you can deduct up to $2,500 of the interest paid on those loans each year. This is another “above-the-line” deduction, so you don’t need to itemize to claim it. The deduction phases out at higher income levels, but many middle-class taxpayers still qualify. Be sure to receive and keep Form 1098-E from your loan servicer to claim this deduction.
Energy-Efficient Home Improvements
Making energy-efficient improvements to your home can lead to tax credits. The Residential Renewable Energy Tax Credit allows you to claim 30% of the cost of solar electric property, solar water heaters, geothermal heat pumps, and small wind turbines. There are also credits available for energy-efficient windows, doors, and insulation. Keep receipts and manufacturer certifications for any qualifying improvements.
Job Search Expenses
If you’re looking for a job in your current occupation, you may be able to deduct certain job search expenses. This includes costs like resume preparation, travel expenses for interviews, and employment agency fees. While this deduction was suspended for tax years 2018-2025 for employees, it’s still available for self-employed individuals. Keep detailed records of all job search-related expenses throughout the year.
Moving Expenses for Military
While the deduction for moving expenses was eliminated for most people in recent tax law changes, it’s still available for active-duty military members moving due to military orders. This deduction covers reasonable expenses for moving household goods and personal effects, as well as travel costs. If you’re in the military and have moved for service, be sure to keep all receipts and documentation related to your move.
Self-Employed Health Insurance Deduction
If you’re self-employed, you can deduct 100% of your health insurance premiums for yourself, your spouse, and your dependents. This is an “above-the-line” deduction, meaning you don’t have to itemize to claim it. The deduction can’t exceed your business’s net profit, and you can’t claim it for any month you were eligible for employer-sponsored health coverage. Keep records of all premium payments throughout the year.
Earned Income Tax Credit
The Earned Income Tax Credit (EITC) is often overlooked by middle-class taxpayers who assume they earn too much to qualify. However, the income limits are higher than many people realize, especially for married couples with children. The credit can be worth up to $7,830 for the 2024 tax year, depending on your income and number of children. Even if you didn’t qualify in previous years, changes in income or family size might make you
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