Who doesn't love getting a big fat check from the IRS? For many Americans, a tax refund is the biggest windfall of the year. But are you getting back as much as you deserve? With a little planning and strategy, you can potentially supercharge your refund.
Here are some expert tips to help you keep more of your hard-earned money:
1. Revisit Your Filing Status
Your filing status has a huge impact on your tax refund. While "Single" or "Married Filing Jointly" are standard, you might qualify for "Head of Household" if you're unmarried and pay more than half the cost of keeping up a home for a qualifying person (like a child or dependent parent). This status offers a higher standard deduction and more favorable tax brackets.
2. Don't Overlook "Above-the-Line" Deductions
These are deductions you can take even if you don't itemize. They reduce your Adjusted Gross Income (AGI), which can help you qualify for other tax breaks. Common examples include:
- Student Loan Interest: Deduct up to $2,500 of interest paid.
- Educator Expenses: Teachers can deduct up to $300 for classroom supplies.
- HSA Contributions: Contributions to a Health Savings Account are 100% tax-deductible.
3. Stack Your Credits
Refundable and non-refundable tax credits are dollar-for-dollar reductions of your tax bill. Don't miss out on:
- Child and Dependent Care Credit: If you paid for day care so you could work, you might get a credit worth 20% to 35% of those expenses.
- Residential Energy Credits: Did you install solar panels or energy-efficient windows? The government wants to reward you.
4. Max Out Retirement Accounts (Even After Year-End!)
You can contribute to a Traditional IRA for the 2023 tax year up until the tax filing deadline (usually April 15, 2024). This can lower your taxable income for 2023 and boost your refund instantly.
5. Review Your W-4 Withholding
If you consistently owe money or get a massive refund that acts as an interest-free loan to the government, adjust your W-4 form with your employer. Aim for a "Goldilocks" refund—not too big, not too small—so you have more money in your pocket throughout the year.
Conclusion
Increasing your tax refund typically comes down to effective planning and ensuring you don't leave any deductions or credits on the table. If your financial situation is complex, a professional tax advisor can pay for themselves by finding savings you might miss.
Need a review of your past returns to see if you missed anything? Contact Sanjay TaxPro today.