Online Tax Filing 2025:Ways to Increase Your Tax Refund You Never Thought About
Tax season often brings a mix of anticipation and stress. For many, receiving a tax refund is one of the most significant financial events of the year. While most people know the basics of maximizing their refund—claiming deductions and credits—there are several lesser-known strategies that can help boost the amount you receive. Here are some effective ways to increase your tax refund that you may not have thought about.
Maximize Retirement Contributions
Contributing to retirement accounts not only secures your financial future but can also lower your taxable income. Contributions to traditional IRAs, 401(k) plans, or similar retirement savings accounts are tax-deductible. The more you contribute, the lower your taxable income, potentially pushing you into a lower tax bracket and increasing your refund.
For example, if you're under 50, you can contribute up to $6,500 to an IRA in 2024, and if you're 50 or older, the limit increases to $7,500. Contributing to your 401(k) can also lower your taxable income, and if your employer offers a match, you’re essentially getting money to boost your savings.
Take Advantage of Tax Credits You Might Be Overlooking
Tax credits directly reduce your tax liability, dollar for dollar. While credits like the Earned Income Tax Credit (EITC) or Child Tax Credit are well-known, several lesser-known credits could boost your refund:
•Saver’s Credit: If you contribute to a retirement account, you may qualify for the Saver's Credit, which offers a tax credit for low to moderate-income taxpayers. The amount you can claim depends on your filing status and income but can be as much as 50% of your contributions.
•American Opportunity Tax Credit (AOTC): If you, your spouse, or your dependents are in school, you could be eligible for a credit up to $2,500 per year for qualified education expenses. Unlike many other credits, the AOTC is partially refundable, which means you can still receive part of the credit even if you owe no taxes.
•Energy-Efficient Home Improvements: If you've made energy-efficient upgrades to your home, you may be eligible for a tax credit. The Residential Energy Efficient Property Credit applies to solar panels, solar water heaters, and other energy-saving systems. The Inflation Reduction Act has expanded these credits, offering significant savings.
Review Your Filing Status
Choosing the right filing status can have a significant impact on the size of your tax refund. While "Single" and "Married Filing Jointly" are common choices, some people may qualify for a more advantageous status. For example:
•Head of Household: If you’re unmarried but provide the primary financial support for a child or another dependent, filing as "Head of Household" can provide a higher standard deduction and lower tax rates compared to filing as "Single."
•Married Filing Separately: In certain cases, filing separately may benefit you if your spouse has significant medical expenses or other deductions. However, this status often comes with restrictions, so it's important to evaluate it carefully.
Track and Claim Deductions for Work-Related Expenses
While the ability to deduct work-related expenses has been limited for employees since the Tax Cuts and Jobs Act of 2017, self-employed individuals and those with side businesses still have opportunities. If you're a freelancer or a business owner, there are various expenses that can be deducted from your taxable income, such as:
•Home office expenses
•Business-related travel and meals
•Internet and phone bills used for work
•Business supplies and equipment
These deductions reduce your overall taxable income and may increase your refund if your business expenses exceed your income.
Take Advantage of the Child and Dependent Care Credit
For parents or caregivers, the Child and Dependent Care Credit is a valuable way to increase your refund. If you pay for childcare so that you can work, look for a job, or attend school, you may qualify for this credit. The credit can be up to 35% of qualifying expenses, with a maximum of $3,000 for one child or $6,000 for two or more children.
The credit also applies to the care of other dependents, such as elderly parents, provided they meet certain criteria.
Review Your Tax Withholding Throughout the Year
One common mistake many people make is not adjusting their withholding throughout the year. If you receive a large refund, it may indicate that you're having too much withheld from your paycheck. On the other hand, if you owe a lot of taxes come April, it means your withholding is too low.
By adjusting your withholding mid-year, you can balance your paycheck and refund more effectively. This can be done by submitting a new W-4 form to your employer. The IRS offers a Tax Withholding Estimator tool that can help you determine the correct amount to have withheld.
Claim Your Unclaimed Refund from Previous Years
Did you know that if you didn’t file taxes for a previous year, you could still claim a refund? The IRS allows you to file tax returns for up to three years back and claim any refund you may be entitled to, assuming you meet the necessary requirements. It's worth reviewing past years to ensure you didn’t leave any money on the table.
Consider Investing in Tax-Advantaged Accounts
Beyond retirement accounts, other tax-advantaged accounts can help you lower your taxable income and increase your refund. Consider contributing to:
•Health Savings Accounts (HSAs): Contributions to an HSA are tax-deductible, and if you use the funds for qualified medical expenses, withdrawals are tax-free. If you don’t use the money, it rolls over year after year.
•Flexible Spending Accounts (FSAs): FSAs allow you to contribute pre-tax money for certain health and dependent care expenses. While the money doesn’t roll over like in an HSA, it still reduces your taxable income.
Conclusion
Maximizing your tax refund requires a combination of strategies, from making retirement contributions to reviewing your filing status. By taking advantage of lesser-known credits, tracking work-related expenses, and adjusting your withholding throughout the year, you can increase your refund significantly. It's essential to stay informed about tax laws and take full advantage of the opportunities available to you. By doing so, you not only ensure a larger refund but also improve your overall financial health.