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Want to maximize your tax refund this tax season? You’re not alone in wanting to keep your hard-earned money in your own hands. Whether you’re paying off debts, growing your nest egg, or treating yourself to something special, increasing your tax refund is a savvy financial move that can set your future self-up for success.
There are many ways to optimize your refund if you do some legwork. Find ways to increase your tax refund with a few strategies below!
Want to score every possible deduction and credit you deserve? An H&R Block tax professional or one of our easy-to-use online tax filing options can help you determine how to maximize your tax return.
4 ways to increase your tax refund come tax time
Everyone wants to know how to get more back on taxes, but the hard part is knowing where to start. From filing status considerations to income tax deductions and credits, several factors can impact how much tax you pay each year.
1. Consider your filing status
Believe it or not, your filing status can significantly impact your tax liability. Your income tax filing status informs the Internal Revenue Service (IRS) about you and your tax situation. Typically, your tax return filing status depends on whether you’re unmarried or married by the end of each calendar year—December 31.
The five statuses are:
- Single
- Married Filing Jointly
- Married Filing Separately
- Head of Household
- Qualifying Surviving Spouse with Dependent Child
Considering your filing status is essential because it will impact your overall refund amount. Here is some general tax wisdom on filing statuses based on if you’re married or unmarried:
Head of Household vs. Single (for unmarried individuals)
- If you’re not married and can claim a qualifying dependent, it might be of value to file as Head of Household. This filing status has a higher standard deduction and more advantageous tax brackets than filing as a Single.
- If you care for elderly parents, you could also potentially qualify to claim Head of Household status. This is the case if you provide more than half your parent’s financial support—even if your parent doesn’t live with you.
Married Filing Jointly vs. Separately (for married couples)
- Choosing the Married Filing Separately status could have limitations, such as losing certain deductions and credits available. For this reason, you should carefully consider your filing status choice to maximize your refund potential. (Related read: “What is the benefit of Married Filing Jointly vs. Married Filing Separately?”
- The Child Tax Credit is available to Married Filing Separately spouses, which entitles them to a credit of up to $2,000 per year for each qualifying child. It can be claimed by a separate filer with less than $200,000 in adjusted gross income (it’s $400,000 for joint filers).
- While choosing the Married Filing Jointly filing status is advantageous for many taxpayers, there may be times where choosing the Married Filing Separately filing status is appropriate.
You can leverage tax pros or online tax programs to determine the best filing status for you for the given tax year.
2. Explore tax credits
Tax credits are a valuable source of tax savings. Compared to tax deductions, they can be better tax refund boosters because they offer a dollar-for-dollar tax reduction. So, for a $1,000 tax credit, you’ll shave $1,000 off your total tax bill.
Many taxpayers leave money on the table with tax credits simply because they don’t know they exist. For example, only four in five eligible taxpayers claim the Earned Income Tax Credit. That could mean missing out on thousands of dollars back with this refundable credit.
Other beneficial tax credits include:
(Related: Go deeper to discover the difference between credits vs. deductions.)
3. Make use of tax deductions
Another beneficial way to boost your refund is through tax deductions. Tax deductions lower your taxable income, which in turn can lower your tax bill. Let’s say a deduction is valued at $1,000 and you’re in the 12% tax bracket. That deduction would then lower your taxable income by $120.
Above-the-line vs. below-the-line deductions
Understanding deductions gets a bit tricky because they fall into different categories, which can impact when you can use them. One of these concepts is whether the tax deductions are above-the-line vs. below the line.
Above-the-line deductions are used in calculating your Adjusted Gross Income (AGI). Below-the-line deductions are taken after your AGI has been calculated to determine your overall taxable income. Above-the-line deductions are often confused with itemized deductions, but they are different.
Common above-the-line deductions include:
IRA contributions
Setting aside retirement funds in a retirement account is a worthwhile effort to save for retirement and score tax benefits. And, if you meet the income requirements, you can offset your income with the amount of your contribution. It’s an above-the-line deduction, which means you can take the deduction even if you’re not itemizing.
Student loan interest deduction
You may be eligible for a student loan interest deduction for up to $2,500 interest paid on a qualified student loan.
More info on itemized deductions
While both can help reduce your taxable income, itemized deductions are simply a method to take deductions.
There are a few ways to take below-the-line line deductions: standard vs. itemized deductions:
- Standard deduction: As the name implies, a standard deduction is a set amount based on filing status. If you choose this route, you only take the one deduction.
- Itemized deductions: are a list of several individual deductions that are different from person to person based on your financial life
- If you own a business, you may also be eligible to claim the qualified business income deduction “QBID” even if you don’t itemize.
In general, you choose standard or itemized based on what’s larger for you.
4. Take year-end tax moves
While you might think tax planning is limited to around the tax deadline (in April), this isn’t the case. Tax planning is a year-round endeavor and is especially important at the end of the calendar year. Taxpayers who make contributions or payments prior to the calendar year end (December 31) can accelerate expenses (deductions), which could result in a lower tax bracket. Here are some examples:
- Schedule health exams and procedures to fully utilize amounts in a health flexible spending account.
- Make charitable donations if you plan to itemize deductions.
- Make contributions to a health savings account or traditional IRA, or budget to make additional qualifying contributions before April 15.
Specific to self-employed, independent contractors, or freelancers:
- If your budget allows, accelerate expenses by making purchases and placing items in service before the end of the year: (Think equipment, hardware or software, home office purchases, and more!) These purchases serve as tax deductions for your business.
How to get a bigger tax refund, and other tax tips
Increasing your tax refund is easier than it sounds—staying organized, choosing the right filing status, and claiming the credits and deductions you qualify for can help you get a bigger refund from the IRS.
Whether you choose to file with a tax pro at H&R Block or file with H&R Block Online, you can rest assured that we’ll get you the biggest refund possible.
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