Deductions vs Credits

• Deductions and exemptions reduce your taxable income. Credits benefit you dollar-for-dollar. Nonrefundable credits are good up to the amount of your tax liability; these credits are good only until your taxes reach zero. Refundable credits are good regardless of your tax liability; you can actually get more money back than you put in.
  
  

Pre-AGI Deductions

• If you used one during the year, you can take a health savings account deduction (Form 8889). If you are self-employed, you may take the self-employed insurance deduction for insurance premiums paid for yourself, your spouse and your dependents. These deductions may affect itemized medical deductions claimed on schedule A
  
  

Personal Exemptions

• You can take a personal exemption of $3,650 each for yourself, your spouse and your dependents.
  
  

Standard And Itemized Deductions

• You can use the larger of the itemized deductions or the standard deduction. The standard deduction is $11,400 if you and your spouse file jointly. Itemized deductions include medical and dental expenses paid for you, your spouse and your dependents. Only medical expenses exceeding 7.5 percent of your adjusted gross income can be deducted. These expenses include insurance premiums, copays, prescriptions, medical services, hospital expenses, fees, dental services and diagnostic tests. You cannot deduct insurance premiums taken out of your salary (pre-tax deductions) because these deductions are not included in your gross income.
  
  If you used a medical savings account, health savings account or flexible spending account, your medical deduction may be reduced dollar-for-dollar.
  
  

Dependent Care Expenses

• If you paid someone to care for your child or a disabled dependent so you can work, you may claim a credit up to $2,100. Unless they are disabled and cannot care for themselves, the child must be younger than 13 years old. You must have earned income, such as wages, salaries, tips or self-employment. Dependent care expenses include day care expenses, wages paid to housekeepers, maids or cooks to provide household services, and expenses to lodge them.
  
  The limits for qualifying expenses are $3,000 for one child and $6,000 for two or more children. Depending on your income, the credit ranges from 20 percent to 35 percent of the qualifying expenses. The dependent care credit is nonrefundable.
  
  

Earned Income Credit

• Depending on your adjusted gross income, you may get back up to $3,050 for one child; $5,036 for two children; or $5,666 for three children for the Earned Income Credit. This credit is refundable.
  
  

Child Tax Credit And Additional Child Tax Credit

• The Child Tax Credit consists of two parts: a nonrefundable Child Tax Credit and a refundable Additional Child Tax Credit. The total limit for both parts of this credit is $1,000 per child.