Introduction

Tax laws rarely remain completely unchanged from one year to the next. For individuals and business owners alike, understanding which tax credits and deductions are available can make a meaningful difference in the amount of tax ultimately owed.

Although the IRS has not yet released every inflation-adjusted amount for tax year 2027, enough information is available to begin planning. Several deductions created or expanded under recent federal tax legislation are expected to remain available, while other tax benefits have expired or changed significantly.

For taxpayers preparing their own returns, these changes also highlight an important issue: qualifying for a deduction is not always as simple as seeing whether an expense sounds deductible. Income limitations, filing status, business use, documentation requirements, and interactions with other tax provisions can all affect the final result.

Here are some of the tax credits and deductions taxpayers should be aware of as 2027 approaches.

Not Every 2027 Tax Number Is Final

Tax year 2027 generally refers to income earned and expenses incurred from January 1 through December 31, 2027, with most individual returns filed in 2028.

As of August 2026, the IRS has not yet released its complete annual inflation adjustments for 2027. Those adjustments will establish important figures such as the standard deduction, federal income tax brackets, various income limitations, and thresholds for certain credits.

This means taxpayers should be cautious when using 2026 tax figures to make decisions for 2027. Tax planning can begin now, but calculations should be updated as additional IRS guidance becomes available.

For business owners, this is particularly important when estimating quarterly taxes, setting compensation, evaluating retirement contributions, or planning large purchases.

The Child Tax Credit Remains an Important Benefit

The Child Tax Credit continues to provide substantial tax savings for qualifying families. Recent legislation increased the maximum credit to $2,200 per qualifying child beginning in 2025 and provided for inflation adjustments after 2025.

With how the credit is indexed for inflation, the final 2027 amount may differ from the current figure.

Eligibility can also become complicated when taxpayers experience changes such as marriage, divorce, shared custody, the birth of a child, or changes in household income. These circumstances can affect which taxpayer is entitled to claim a child and whether income limitations reduce the available credit.

Child and Dependent Care Expenses May Provide Additional Tax Savings

Taxpayers who pay for care so they can work or look for work may qualify for the Child and Dependent Care Credit.

Beginning in 2026, the maximum percentage used to calculate the credit increased for certain taxpayers where qualifying expenses can include daycare, before and after school programs, certain summer day camps, and care for other qualifying dependents.

Proper documentation is important. Taxpayers should maintain records of amounts paid along with the care provider’s identifying information.

For business owners, dependent care costs can become particularly relevant when personal and business schedules overlap. Maintaining a clear separation between personal and business expenses can help prevent problems when preparing the return.

Deductions for Tips and Overtime Continue

Employees working in certain occupations may qualify for deductions related to tip income and overtime compensation.

Eligible workers in qualifying tipped occupations may deduct up to $25,000 of qualified tips, subject to applicable requirements and income limitations.

Certain workers may also qualify for a deduction of up to $12,500 of qualified overtime compensation, or up to $25,000 for married couples filing jointly.

These provisions are currently temporary and are scheduled to remain available through 2028.

Taxpayers should remember that not every dollar appearing on a paycheck as overtime necessarily qualifies for the deduction. Payroll records, Forms W-2, Forms 1099, and other documentation should be reviewed carefully when preparing the return.

Certain Car Loan Interest May Be Deductible

A temporary federal deduction is also available for interest paid on certain qualifying vehicle loans.

Under current law, eligible taxpayers may deduct up to $10,000 per year of qualifying interest for tax years 2025 through 2028.

However, several requirements apply. The vehicle generally must be new, purchased for personal use, and meet applicable final assembly requirements. Income based phaseouts may also reduce or eliminate the deduction.

Business owners should be especially careful when evaluating vehicle deductions because a vehicle used for business may fall under different tax rules. Business mileage, actual vehicle expenses, depreciation, and personal vehicle interest deductions should not automatically be combined without reviewing which treatment applies.

Taxpayers Age 65 and Older May Qualify for an Additional Deduction

Taxpayers aged 65 and older may qualify for an additional federal deduction of up to $6,000 under a temporary provision scheduled to remain available through 2028. Married couples filing jointly may qualify for up to $12,000 when both spouses meet the age requirement.

This is a deduction rather than a tax credit, meaning it reduces taxable income instead of directly reducing the amount of tax owed. The deduction is generally available whether the taxpayer takes the standard deduction or itemizes deductions.

Income limitations apply. The deduction begins phasing out when modified adjusted gross income exceeds $75,000 for individual filers or $150,000 for married couples filing jointly. It is also separate from the additional standard deduction traditionally available to taxpayers age 65 and older, meaning qualifying taxpayers may potentially benefit from both.

Retirees receiving Social Security benefits, pensions, retirement account distributions, investment income, or business income should consider how their overall income may affect how much of a deduction they can receive.

Changes to Charitable Contributions

Charitable deductions have also changed.

Beginning in 2026, taxpayers who do not itemize may deduct certain qualifying cash contributions, subject to applicable limits. The maximum is generally $1,000 for individual filers and $2,000 for married taxpayers filing jointly.

Taxpayers who itemize face additional rules, including a new limitation affecting deductible charitable contributions.

For individuals making substantial donations, the timing of contributions can affect the tax benefit received.

Business owners should also distinguish between personal charitable contributions and legitimate business expenses such as advertising or sponsorships. A payment to a charitable organization is not automatically treated the same way for tax purposes simply because it was made through a business account.

2027 HSA Contribution Limits Are Already Available

The IRS has already announced the Health Savings Account contribution limits for 2027.

The limit will be $4,500 for taxpayers with qualifying self-only coverage and $9,000 for those with qualifying family coverage.

HSAs can provide several potential tax benefits. Eligible contributions may reduce taxable income, earnings can generally grow tax deferred, and qualifying medical withdrawals can be tax free.

Business owners who purchase their own health insurance or provide benefits to employees should also consider how health insurance arrangements, HSA contributions, payroll, and the business’s tax structure interact.

Several Popular Energy Tax Credits Have Ended

Taxpayers should be careful when relying on older tax information found online.

Several federal credits for residential energy improvements and clean energy property ended after 2025 under current law. As a result, homeowners making improvements during 2027 should not assume that an expense qualifies simply because it would have generated a federal credit in an earlier year.

State programs, local incentives, or utility rebates may still be available, but they are separate from federal income tax credits.

Business Owners Should Look Beyond Individual Deductions

For business owners, tax planning involves considerably more than identifying personal credits.

The way a business is structured can affect how income is reported, how the owner is compensated, which expenses are deductible, and how taxes are paid throughout the year.

Common areas requiring review can include business vehicle expenses, equipment purchases, depreciation, retirement plan contributions, health insurance, payroll, estimated tax payments, home office expenses, and the distinction between personal and business spending.

A deduction that appears beneficial by itself may also affect another portion of the return. That is why tax planning should consider the entire tax situation rather than focusing on individual deductions in isolation.

Tax Preparation Should Be More Than Entering Numbers

Tax software can calculate a return based on the information entered into it, but it does not always identify missing information, questionable classifications, or planning opportunities that were never entered.

Professional tax preparation can be particularly valuable when a taxpayer owns a business, has multiple sources of income, changes filing status, purchases or sells property, receives investment income, has employees, or experiences other significant financial changes.

Reviewing these issues before filing can help taxpayers identify deductions and credits they legitimately qualify for while reducing the likelihood of improperly claimed expenses or missed tax planning opportunities.

Start Planning Before Tax Season

The best time to consider tax credits and deductions is generally before the tax return is due.

As additional IRS guidance for 2027 becomes available, taxpayers should review how updated brackets, deduction amounts, income thresholds, and other changes affect their situation.

For business owners, year-round bookkeeping and tax planning can be especially valuable because many tax decisions cannot simply be recreated after December 31.

Whether you need assistance with an individual return, a business return, or both, working with an accounting professional can help ensure that your tax filings reflect your complete financial situation and that available tax planning opportunities are considered.

Contact Volpe Consulting & Accounting to discuss your personal or business tax preparation needs. Our team can help you evaluate available deductions and credits, prepare accurate tax filings, and identify tax planning opportunities based on your individual or business circumstances.

Disclaimer

This article is intended for general informational purposes only and does not constitute legal, tax, payroll, or accounting advice. Tax laws, limits, and IRS guidance may change, and the correct treatment depends on each taxpayer’s individual or business circumstances. Taxpayers should consult qualified professionals regarding their specific situation.