Wondering how to get a bigger tax refund this season? Taking advantage of money-saving tax credits and deductions is just one way to maximize your refund. Here are some other strategies that will boost your refund or at least help you pay no more than you owe.
Adjust your tax withholding
Are you having enough taxes withheld from your pay? If you’re unsure, use a withholding calculator to find out now. This will save you a lot of tears and heartache come April. Paying too little taxes means you’ll owe money when you file your return. On the flip side, you’ll receive a refund if you overpaid. It’s a smart idea to check your withholding at the beginning of every year and submit a new W-4 to your employer if adjustments must be made.
Save for retirement
Contributing money to a 401k or traditional IRA is a great way save for your golden years and reduce your taxable income. Since your contributions are pre-tax, every dollar you put in reduces your taxable income and you’ll pay less income taxes. You have until December 31st to max out your 401k which hopefully is something you were already working towards. For 2021, the contribution limit is $19,500 ($26,000 if you’re aged 50 or older). Taxpayers with a traditional IRA, have more time to contribute for 2021. The deadline isn’t until April 15, 2022. The maximum you can contribute is $6,000. However, those age 50 or older can save $7,000 if they’re making catch-up contributions.
Contribute to a health savings account (HSA)
Contributing to an HSA is another great way to reduce your taxable income. For those who don’t know, an HSA is a savings account that’s lets you save pre-tax income for medical expenses. The HSA contribution limit for 2021 is $3,600 for individuals and $7,200 for families. Saver’s age 55 or older can also make catch-up contributions up to $1,000. You have until April 15, 2022 to make contributions for 2021.
Reconsider your filing status
Your filing status is important because it determines your filing requirements, standard deduction and which credits you’re eligible for. If you got married, divorced, or experienced some other major life change, it’s a good idea to reconsider your filing status. Remember, your marital status on December 31st determines the filing status you’ll use on your return. So, even if you got hitched in December, the IRS considers you married for the entire year and you can file a joint return with your spouse. It’s also worth noting that single parents can benefit more by filing head of household versus single because the standard deduction is higher. Making that simple switch can save you thousands of dollars. When you use ezTaxReturn, we’ll help you choose the best filing status.
Know which receipts are worth keeping
Holding on to the right receipts can help you save money especially if you plan to itemize. Generally, you want to keep anything related to your income, medical expenses, childcare bills, home, and charitable contributions. For a full list of everything that can save you time and money on your return, check out our tax prep checklist. Store your tax documents in a file folder and label each category, so it’s easy to find when you’re ready to file.
Claim your tax credits
The IRS offers a bunch of tax credits you can claim to reduce the amount of taxes you owe. Some of the most popular ones are:
- Earned Income Tax Credit (EITC) – The EITC was created to help working families with low to moderate incomes. If you have three or more qualifying children, you can receive up to $6,728 for tax year 2021. Taxpayers with fewer or no children can qualify for a smaller credit amount.
- Child Tax Credit – The credit is worth $3,000 per child aged 6-17 and $3,600 per child aged 5 and under for tax year 2021.
- Child and Dependent Care Credit – You may qualify for the credit if you paid someone to watch your dependent while you went to work. For 2021, the credit is worth up to $4,000 for one qualifying person and $8,000 for two or more qualifying people.
Use ezTaxReturn to ensure you get every tax credit and deduction you rightfully deserve, so you get the biggest possible refund, guaranteed. Pre-register now and get our best deal when you file with us.
Don’t overlook deductions
Tax deductions reduce your income before taxes are calculated. Taxpayers have the option of choosing the standard deduction or itemizing. For 2021, the standard deduction will be $12,550 for single taxpayers and married couples filing separately, $18,800 for head of household and $25,100 for married couples filing jointly. If your deductible expenses are more than the standard deduction, it makes more sense to itemize. Allowable expenses include:
- State and local taxes
- Charitable contributions
- Gambling losses
- Home mortgage interest
- Medical and dental expenses (above 7.5% of your adjusted gross income)
Do your taxes with ezTaxReturn and we’ll compare your standard deduction versus itemized deductions, so you can choose the one that saves you the most money.