When it comes to filing taxes, there’s one thing everyone wants: the biggest refund possible. Here are a few tried and tested, top-secret (OK, maybe not exactly secret, but often overlooked) ways to boost your refund when filing your tax return, brought to you by the folks at TaxGlobal.
- Reconsider your filing status
Jointly or Separately?
Most married couples file their taxes jointly, but in some cases, you may be able to increase your tax refund by filing separately. For instance, if one partner has had to make COBRA payments, they’ll likely be able to deduct more by filing as a single individual. The Child Tax Credit is another deduction available to separately filing spouses.
But it’s not always worth it to file separately, as you may lose other deductions and credits. To ensure you’re getting the highest tax refund possible, you may want to calculate your taxes using both statuses, then choose the best option. Just be aware that if you both file separately, both you and your partner will need to go the same route when it comes to itemizing your deductions or taking the standard deduction. You can’t do both, even on separate returns.
Head of Household
If you’re unmarried and can claim a qualifying dependent (a child who lived with you for more than six months and was supported financially by you, or an elderly parent supported by you), you may be able to file as Head of Household. In this case, you’ll get a greater standard deduction than if you were simply filing as a single individual. You can claim an elderly parent as a dependent even if they don’t reside with you, but you do have to provide more than half of their financial support.
- Take all the deductions you can
The truth is, there are a lot of deductions most taxpayers don’t even know about. Here are the most commonly applicable.
- State sales tax: you can use the IRS’s calculator to determine and deduct the amount you paid in state and local sales taxes
- Student loan interest: if you’re obligated to pay student loan interest, and if some of that interest was paid in the previous year, you may be able to take this deduction, even if you didn’t personally pay the interest
- Child and dependent care: if you paid for childcare in order to enable you to work, you may be able to deduct up to $6000
- Out-of-pocket charitable contributions: most people already know about the charitable donations deduction, but there’s also a deduction for small expenses like the ingredients you bought for a charity bake
- Contribute to your IRA and HSA
IRA
Contributing to an Individual Retirement Arrangement (IRA) or Health Savings Account (HSA) can also help increase your tax credits and refund.
Contributing to a traditional IRA can help reduce your amount of taxable income. If you’re 50 or older, make the maximum contribution and you can take advantage of the catch-up provision, which adds to your IRA.
Alternatively, if you have a Roth IRA, you won’t get a deduction, but you may be able to receive the Saver’s Credit, provided you meet the income guidelines.
HSA
Contributing to an HSA can also help reduce your taxable income. In order to open an HSA, you must meet all the following requirements:
- Have a health insurance plan with deductibles equal to or greater than the amounts required by the IRS
- Have a health insurance plan that matches the limits set by the IRS for maximum annual out-of-pocket costs
- Not have other “first-dollar” health coverage
- Not be enrolled in Medicare
- Not be claimed as a dependent on anyone else’s tax return
- Take advantage of timing
There are things you can do throughout the year to increase your refund when tax season rolls around. But you have to keep an eye on the calendar and take advantage of each opportunity when it comes. Here are a few ideas.
- Make your January mortgage payment in December to increase your mortgage interest deduction
- Donate to qualified charities before the end of that tax year
- Are you self-employed? Stock up on supplies and equipment before the end of the year so you can claim a larger deduction (even things like painting your home office may count, provided you can take the home office deduction)
- Schedule doctor’s appointments and medical treatments for the last quarter of the year so you can claim a higher medical expense deduction
- Use tax credits
Unlike deductions, tax credits reduce your taxes owed dollar for dollar. Here are a few credits you may be able to claim.
- Earned Income Tax Credit
At least 20% of Americans don’t realize they qualify for this. Don’t be part of the 20%! The Earned Income Tax Credit (EITC) is available even for single taxpayers, but the amount jumps significantly if you have three or more qualifying children.
- Child and Dependent Care Credit
We already mentioned this one above, but it’s worth repeating. If you had to pay for daycare or childcare in 2022 so that you could work, you’re likely eligible for this credit.
- American Opportunity Credit
This credit applies to students, or parents supporting those students, who had to make payments toward their first four years of undergraduate education.
- Lifetime Learning Credit
Graduate students may be able to claim 20% of their education costs, up to $10,000 depending on income.
- Energy-saving Home Improvements
If you made home improvements to conserve energy, such as installing solar panels, you may be able to claim up to 30% of that cost as a credit.
Here at TaxGlobal, our goal is to make taxes better for everyone, and that means helping you get the most from your refund. Hopefully these tips will allow you to reduce your amount owed and increase your refund this tax year.
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