How to Maximize Your Tax Refund: 10 Savvy Tips on Filing Status, Credits, Deductions, and More
- Claim the best filing status you can. Choosing the filing status that best matches your situation can lower your taxes and increase your refund. For example, if you are married, you can compare the tax liability of filing jointly or separately to see which one gives you a better outcome.
- Use the earned income tax credit if you qualify. This is a refundable credit that can decrease the amount of taxes you owe and may get you a tax refund even if you don’t owe any tax. To be eligible, you have to meet certain income and residency requirements.
- Many parents can use the child tax credit. This is another refundable credit that can reduce your tax bill by up to $3,600 per child under 6 years old and $3,000 per child between 6 and 17 years old. You also have to meet income and dependency criteria to claim this credit.
- Be smart about itemizing or using the standard deduction. The standard deduction is a fixed amount that reduces your taxable income based on your filing status. Itemizing deductions means listing your eligible expenses and subtracting them from your income. You should compare the two methods and choose the one that gives you a lower tax liability.
- Contribute to a traditional IRA. A traditional IRA is an individual retirement account that allows you to save money for retirement and reduce your taxable income at the same time. You can deduct your contributions up to a certain limit, depending on your income and whether you have access to a retirement plan at work.
- Max out contributions to a health savings account. A health savings account (HSA) is a tax-advantaged account that lets you save money for medical expenses. You can deduct your contributions to an HSA from your income, as long as you have a high-deductible health plan and meet other requirements.
- Claim a credit for energy-efficient home improvements. If you made any upgrades to your home that improve its energy efficiency, such as installing solar panels, windows, doors, or insulation, you may be able to claim a credit of up to 26% of the cost of the improvements.
- Don’t overlook dependent care expenses. If you paid for child care or care for a dependent adult while you worked or looked for work, you may be able to claim a credit of up to 50% of the qualifying expenses, up to a limit of $8,000 for one dependent or $16,000 for two or more dependents.
- Adjust your withholding if you have multiple sources of income. If you have income from a second job, a side gig, investments, or other sources, you may need to adjust your withholding on your main job to avoid underpaying your taxes throughout the year. You can use a W-4 Withholding Calculator to help you estimate what you should enter on your W-4 and adjust the amount that you can expect as a refund when you prepare your taxes.
- Claim deductions for charitable contributions. If you donated money or goods to a qualified charitable organization, you may be able to deduct the value of your donations from your income. You have to itemize your deductions to claim this benefit, and you have to keep records of your donations, such as receipts or bank statements.