Free AI Tax Expert - Deductions, Credits and Filing Help

One of the largest credits available to low-to-moderate income workers. The IRS estimates that roughly 20% of eligible taxpayers fail to claim it every year - Often because they mistakenly believe they don't qualify. Eligibility is based on earned income, adjusted gross income, investment income limits, and number of qualifying children. Single workers without children can still qualify at lower income thresholds.

If you pay for childcare (daycare, after-school programs, summer camps) or care for a dependent adult so you can work or look for work, you may claim 20-35% of up to $3,000 in expenses (one qualifying person) or $6,000 (two or more). The credit percentage phases down at higher income levels. Documentation required: the caregiver's name, address, and taxpayer identification number.

20% of the first $10,000 in qualified education expenses. Unlike the American Opportunity Credit, the Lifetime Learning Credit is not limited to the first four years of college and applies to graduate programs, vocational courses, and professional development classes - For any student in the household. Income phaseout begins around $80,000 (single) / $160,000 (married).

A credit for low-to-moderate income individuals who contribute to a qualified retirement account (401k, IRA, SIMPLE, SEP). Worth 10-50% of contributions up to $2,000 ($4,000 married filing jointly). Income limits are relatively low - Under $36,500 for single filers in 2024 - But many part-time workers, young workers, and lower-income households qualify and never claim it.

100% of the first $2,000 in qualified education expenses plus 25% of the next $2,000, for a maximum of $2,500 per eligible student per year. Limited to the first four years of post-secondary education. Partially refundable (up to $1,000), meaning you can receive money back even if your tax liability is zero. Requires Form 1098-T from the institution.

Under the Inflation Reduction Act, homeowners can claim 30% of costs for qualifying energy improvements with an annual cap of $3,200. Qualifying improvements include heat pumps (up to $2,000 credit), insulation, energy-efficient windows and doors (up to $600 each), and more. The credit resets annually - Meaning you can claim up to $3,200 per year if you spread improvements over multiple tax years. No income limit.

Q: I made $85,000 as a W-2 employee and $18,000 as a freelancer. What are my tax obligations?

A: Your W-2 income has federal income tax withheld by your employer, but your $18,000 freelance income is not withheld - you're responsible for both income tax and self-employment tax on it. Self-employment tax is 15.3% (Social Security and Medicare) on your net freelance income - roughly $2,750. You can deduct half of that SE tax on your 1040. At your combined income level, you're in the 22% federal marginal bracket. You should be making quarterly estimated tax payments to the IRS (April 15, June 15, September 15, January 15) to avoid an underpayment penalty - estimate $300-500/quarter based on your freelance earnings. Track all legitimate business expenses (home office, software, equipment, professional subscriptions) to reduce your net freelance income before calculating SE tax.

Q: I sold some stock this year. Some I held over a year, some under. How is this taxed?

A: The holding period determines your tax rate. Assets held longer than 12 months qualify for long-term capital gains rates: 0%, 15%, or 20% depending on your total taxable income. In 2024, singles earning under $47,025 pay 0% long-term rate; $47,026-$518,900 pay 15%. Assets held 12 months or less are short-term gains, taxed as ordinary income (10-37% depending on your bracket). Strategy: if you have unrealized losses in other positions, you can sell those to offset gains - called tax-loss harvesting. You can also offset gains with up to $3,000 of capital losses against ordinary income, with excess carried forward. Report on Schedule D and Form 8949. Your brokerage will send a 1099-B in January with all transactions listed.

Q: Should I contribute to a Traditional IRA or a Roth IRA? I'm 32 and earn $75,000/year.

A: At $75,000 income and age 32, the math generally favors Roth, but the right answer depends on your expected future income. Traditional IRA: you deduct contributions now (tax savings this year), pay ordinary income tax on withdrawals in retirement. Roth IRA: no deduction now, but all growth and withdrawals are tax-free. The key question is whether you expect your marginal tax rate in retirement to be higher or lower than it is today. At 32 with $75k income (22% federal bracket), most financial planners favor Roth because: (1) 30+ years of tax-free growth is enormously valuable, (2) you likely have higher earnings - and thus higher tax rates - ahead, (3) Roth has no required minimum distributions. If you have a 401k at work, max that first for the employer match, then contribute to Roth IRA. 2024 IRA limit: $7,000 ($8,000 if over 50). Roth eligibility phases out at $146,000 for singles.

Q: I run an Airbnb. What can I deduct and do I need to pay self-employment tax?

A: Airbnb rental income is reported on Schedule E (passive income), not Schedule C - which means you generally do NOT owe self-employment tax, unlike freelance work. However, if you provide substantial services like daily cleaning or meals, the IRS may treat it as a Schedule C business. Deductible expenses: mortgage interest and property taxes (prorated for rental days), depreciation of the property (significant - calculated over 27.5 years for residential), cleaning fees you pay, platform fees Airbnb charges, supplies, utilities prorated for rental portion, insurance prorated, and any repairs specifically for the rental. The 14-day rule matters: if you rent for 14 days or fewer per year, the income is completely tax-free and you can't deduct expenses. Above 14 days, expenses are prorated based on rental days vs. personal use days.