what is tax relief 
tax relief refers to any government program or policy designed to help individuals and businesses reduce their tax burdens or resolve their tax related debts tax relief may be in the form of universal tax cuts targeted programs that benefit specific groups of taxpayers or initiatives that bolster particular goals of the government for example the child tax credit gives a tax break to parents of minor children while the tax credit for green improvements e g energy efficient windows furthers the goal of u s energy independence and cleaner air 12tax relief basicstax relief programs and initiatives help taxpayers reduce their tax bills through tax deductions credits and exclusions other programs help taxpayers who are behind on their taxes settle their tax related debts potentially avoiding liens in the process government policy goals are often the catalyst for amending the federal tax code for example in response to concerns about the general lack of retirement savings in the u s congress created incentives to encourage people to save for retirement in tax advantaged savings accounts such as iras and 401 k s tax relief is also available for people affected by natural disasters for example the irs has historically made tax relief announcements to help individuals and businesses affected by severe storms tornados flooding hurricanes straight line winds wildfires and drought the relief typically comes in the form of filing and payment extensions penalty and interest waivers and deductions for casualty and theft losses sustained due to federally declared disasters 4you can t deduct casualty and theft losses covered by insurance unless you file a timely claim for reimbursement and reduce the loss by your anticipated reimbursement 5tax deductionsa tax deduction reduces your taxable income for the year thereby lowering your tax bill taxpayers can take the standard deduction or itemize their deductions on schedule a of form 1040 or 1040 sr you can t do both 36 in addition there are a number of tax deductions a taxpayer can take independent of the standard deduction or itemized deduction each type is discussed more below the standard deduction amount is based on your filing status age and whether you are disabled or claimed as a dependent on someone else s income tax return here are the standard deduction amounts for the 2023 and 2024 tax years 7you can take an extra deduction if you are at least age 65 or legally blind by the end of the tax year for tax year 2023 this additional standard deduction is 1 500 1 850 if filing as single or head of household if you are 65 or older or blind the amount doubles if you are 65 or older and blind the additional standard deduction for 2024 is 1 550 1 950 if single or head of household 89if another taxpayer can claim you as a dependent your standard deduction for tax year 2023 is limited to the greater of 1 250 or your earned income plus 400 the total can t be more than the basic standard deduction for your filing status for 2024 the standard deduction for a dependent increases to 1 300 or the individual s earned income plus 450 10itemized deductions are expenses that can be subtracted from your adjusted gross income to lower your taxable income and tax bill you can itemize your deductions only if you don t claim the standard deduction it makes financial sense to itemize if the total amount you can deduct is greater than the standard deduction for your filing status common itemized deductions include 11beyond the standard deduction and itemized deductions there are other deductions taxpayers can take for example taxpayers who have paid interest on qualifying student loans may be able to deduct up to 2 500 from their taxable income this deduction can be taken whether the taxpayer takes the standard deduction or itemized deduction 13another deduction is the educator expense deduction designed to support teachers and eligible educators this deduction allows educators to deduct up to 250 of unreimbursed expenses incurred for classroom supplies 14last the health savings account hsa deduction offers a tax advantage for individuals with a high deductible health plan contributions made to an hsa are tax deductible reducing taxable income and providing a way for individuals to save for qualified medical expenses 15tax relief often targets specific taxpayers such as those facing unexpected costs due to a hurricane or a wildfire tax creditsa tax credit is another form of tax relief unlike tax deductions which lower your taxable income tax credits directly reduce the amount of tax you owe 3here s an example say a taxpayer takes the standard deduction and their tax bill amounts to 3 000 if the person is also eligible for a 1 000 tax credit their final tax bill would be 2 000 by comparison with a 1 000 tax deduction someone in the 22 tax bracket would save just 220 tax credits are more favorable than tax deductions because they reduce the amount of tax you owe not just your taxable income this type of tax relief is often described as a tax incentive because it reimburses taxpayers for expenditures the government deems worthwhile for example the american opportunity tax credit aotc and the lifetime learning credit llc programs give tax credits to people who enroll in post secondary education programs 1617other popular tax credits include tax exclusionswhile tax deductions are amounts you deduct from your income tax exclusions set aside certain types of income as non taxable as such tax exclusions reduce your taxable income and your tax bill for example you can generally exclude from your income any child support payments life insurance death benefits and municipal bond income you receive 1819a common tax exclusion is the one for employer sponsored health insurance health insurance premiums your employer pays are exempt from federal income and payroll taxes and the portion of premiums you pay is generally excluded from your taxable income the exclusion of premiums lowers your tax bill effectively reducing your after tax cost of health insurance coverage 2021if you earned income overseas you might be eligible for the foreign earned income exclusion and the foreign housing exclusion to qualify you must be a u s citizen or resident alien who is a resident of a foreign country for an uninterrupted period that includes the entire tax year 22another popular tax exclusion pertains to selling a house if you have a capital gain from the sale of your main home you can exclude up to 250 000 500 000 if married filing jointly of that gain from your income to qualify you must have owned and lived in the home for at least two out of the previous five years and you must not have excluded the gain from the sale of another home within the last two years 23in some cases income excluded for tax purposes is not recorded on the return in other cases it is recorded in one section of the return and then deducted in another area tax debt reliefthe irs fresh start program helps taxpayers catch up on back taxes and avoid tax liens levies wage garnishments and jail time launched in 2011 the program is a group of changes to the u s tax code that streamlines the collection process and makes it possible to settle your tax debt for less than the total amount you owe individuals and businesses are eligible for the program 24here are four fresh start options for taxpayers behind on their tax payments keep in mind that while helpful the fresh start program isn t necessarily easy to navigate and deciding which avenue to pursue can be tricky if you have significant tax debt consider working with a tax professional who can make sure you apply to the appropriate program and guide you through the process 