6. Deductions and Credits
TAX-106 · Lesson 6

Lower the bill

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Briefing · 1 min

Deductions and credits.

What Dana said

2025 standard deductionSingle $15,750 · Head of household $23,625 · Married filing jointly $31,500.
Itemize only if moreMortgage interest, state and local taxes and charity must add up to more.
Deduction vs creditA deduction lowers taxable income. A credit lowers the tax itself.
Two big creditsChild tax credit: up to $2,200 per child under 17. EITC: up to about $8,000 with 3+ kids.
Refundable or notNonrefundable: down to zero, not below. Refundable: can create a refund (extra due diligence).
D
Today you help clients keep more of their money, the right way.
9:10 AM · The couple

Itemize or standard?

P
"We paid $9,000 mortgage interest, $6,000 state and local taxes, and gave $1,500 to charity." (Married filing jointly)
10:30 AM · Quick check

A single client asks:

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"What's my standard deduction for 2025?"
1:00 PM · Credit sort

Refundable or nonrefundable?

Tap the right type for each credit.

…
Refundablecan create a refund
    Nonrefundablestops at zero tax
      3:30 PM · Curveball

      Zero tax, one credit.

      T
      "My tax is already $0. I have a $500 nonrefundable credit. Do I get $500 back?"
      Jazzy

      Shift complete!

      🏅 Deduction Detective · 0 XP
      • Choose standard vs itemized
      • Quote the 2025 standard deductions
      • Tell refundable from nonrefundable
      • Explain the big family credits

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      Lesson notes

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      What you will learn
      • The difference between the standard deduction and itemizing
      • The main credits for working families
      • The difference between refundable and nonrefundable credits
      Standard deduction or itemize

      Most clients take the standard deduction. For tax year 2025 it is $15,750 for single or married filing separately, $23,625 for head of household and $31,500 for married filing jointly or qualifying surviving spouse (additional amounts apply for age 65 or older or blind). A client itemizes on Schedule A only when mortgage interest, state and local taxes (capped), charitable gifts and other itemized deductions add up to more.

      New deductions for 2025

      For 2025 through 2028 there are new deductions for qualified tips, qualified overtime pay, interest on certain new car loans and an additional deduction for taxpayers age 65 and older. Each has limits and income phase-outs; check current IRS guidance before applying them.

      Credits for families
      • Child tax credit: up to $2,200 per qualifying child under 17 for 2025, with a refundable portion (additional child tax credit) of up to $1,700 per child for taxpayers with at least $2,500 of earned income; valid SSNs are required.
      • Earned income tax credit (EITC): for 2025, up to $649 with no children, $4,328 with one, $7,152 with two and $8,046 with three or more, subject to income limits; investment income must be $11,950 or less.
      • Credit for other dependents, child and dependent care credit and education credits may also apply.
      Refundable vs nonrefundable

      A nonrefundable credit can reduce the tax to zero but not below. A refundable credit can create a refund even when no tax is owed. Refundable credits carry extra due diligence requirements.

      Key terms
      • Standard deduction: A fixed amount that reduces taxable income based on filing status
      • Itemized deductions: Specific expenses listed on Schedule A
      • Refundable credit: A credit that can be paid out even if no tax is owed
      • EITC: Earned Income Tax Credit for low- to moderate-income workers
      Practice example (fictional)

      A married couple filing jointly paid $9,000 of mortgage interest, $6,000 of state and local taxes and gave $1,500 to charity. Itemize or standard? Their itemized total is $16,500, less than the $31,500 standard deduction, so they take the standard deduction.

      Official sources
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