5 Ways to Get a Bigger Tax Refund

Author: Hello Alyson

Tax season in the United States is rapidly approaching. From January 23 to April 23, the Internal Revenue Service (IRS) will start accepting and processing tax returns (Tax Day).

While filing your taxes may be a chore due to the complexity of tax codes, you can take advantage of it. 

Tax credits and deductions, for example, can help reduce your liability and boost your tax refund.

If you want a larger tax refund this year? I strongly recommend you read this article meticulously. 

This article will review a few strategies to help you get the most out of your tax refund.

Let’s get started!

5 Top Ways to Get a Bigger Tax Refund

1. Consider your Filing Status

As previously stated, whether single or married, your filing status significantly impacts your tax refund. If you are single, you should determine whether you are eligible for head of household status.

To be eligible, you must have contributed more than half the cost of running a household for yourself and a qualifying dependent (a child or an aging parent) to qualify for this status. 

Your tax refund could significantly increase if you qualify for head of household status.

If you’re married, you can file your taxes jointly, but there are some instances where you should consider filing separately. For example, if you or your partner have a lot of business or medical expenses, filing separately will help you reduce your AGI and increase the amount you can deduct.

On the other hand, filing your taxes separately may result in the loss of substantial tax credits. So, to make the best decision, make sure you consider all of your options.

2. Know the Differences Between Tax Credits and Tax Deductions

While tax deductions and credits can help reduce your total tax liability and increase your tax refund, it’s essential to understand their differences.

Tax credits reduce your tax liability on a dollar-for-dollar basis. For example, if you qualify for a $2,000 tax credit and owe $4,000 in taxes, the credit will reduce your tax liability by $2,000 ($2,000 less the credit). 

Also, factors such as tax filing status, age, and income influence your ability to qualify for a specific tax credit.

Tax deductions, on the other hand, lower your taxable income for the year. A $2,000 deductible, for example, could reduce your taxable income from $40,000 to $38,000. Because your tax liability is calculated as a percentage of your taxable income, tax deductions are beneficial.

Overall, tax credits are more powerful than tax deductions, but make sure to find the best one for your situation.

3. Maximize your IRA

Putting money aside in an individual retirement account (IRA) is an excellent way to save and invest for retirement while receiving a tax bonus. You can contribute to your IRA until the tax filing deadline, which is in April this year.

Traditional IRA contributions may be fully or partially deductible, but they will reduce your taxable income. IRA contributions are above-the-line deductions, which means you can take them even if you don’t itemize. You can also claim a tax credit for your IRA contributions.

4. Claim the EITC

Individuals, families, and other taxpayers with low to moderate income may be eligible for the Earned Income Tax Credit (EITC). The EITC may help you reduce your tax liability and qualify for a tax refund.

However, to be eligible for the EITC:

• You must be a US citizen or a non-resident alien married to a US citizen.
• You must have a valid Social Security number (SSN)
• You must not be anyone’s dependant.
• You must be between the ages of 25 and 65 and have lived in the United States for at least six months.

5. Understand the Importance of Timing

Paying attention to the calendar can increase your chances of receiving a larger refund. Look for ways to reduce your taxable income through contributions or payments.

 You could, for example, schedule health-related exams and treatments in the fourth quarter of the year to maximize your medical expense deductions.

You could also look into charities to donate to, but make sure they are qualified and keep track of your expenses. Furthermore, if you make your January mortgage payments before December 31, you may be eligible for additional interest on your mortgage interest deductions.

The Bottom Line

To maximize your tax refunds, you must optimize your tax credits, deductions, and claims. Even your filing status plays a significant role in obtaining a larger refund.Use good tax filing software to guide you through the process and ensure you get the best possible refund. bFurthermore, the IRS claims taxpayers who file their taxes electronically and choose direct deposit will receive their tax refund within 21 days. Begin filing your taxes right away!