Everyone loves getting a refund at tax time and the bigger the check, the better. Although the average refund is around $3,000, not everyone is so lucky. If you owed the IRS or got very little money back this year, we have a few tricks to help boost your tax refund next year.
Make adjustments on your Form W-4
Let’s be honest, most of us complete a Form W-4 when we first start our jobs and never think about it again. Owing the IRS is an obvious sign that it is time to update your withholding information on your W-4. To make adjustments, you must complete a new Form W-4 and submit it to your employer. It’s recommended that you check your withholding anytime your personal or financial situation changes. In previous years, you were allowed to change the amount of allowances to have less taxes withheld from each paycheck. The more allowances you claimed on your W-4, the less taxes were deducted. But the rules of the W-4 form changed with the 2017 Tax Cuts and Jobs Act. Personal exemptions are no longer allowed and you cannot claim allowances. A new W-4 form was implemented by the IRS in 2020 to simplify the process. The IRS provides a Tax Withholding Estimator to help you see how your withholding amount affects your paycheck or taxes due at filing time. If too much federal income taxes are withheld, you will get a refund. If you have too little tax withheld, you may owe taxes during filing time.
Hold on to your receipts
The next time you get a receipt, think twice about throwing it away. Some expenses are tax deductible and can help you boost your tax refund. For example, you can deduct the following items if you itemize:
- Medical and dental expenses
- State and local taxes
- Real estate taxes
- Mortgage interest
- Charitable contributions
Just keep in mind that there is a limit as to how much you can subtract for certain expenses. Don’t worry, when you prepare your return with ezTaxReturn.com, we do the math for you.
Go back to school
On the fence about going back to school? Stop procrastinating and take the plunge. Students who pay for tuition and other related expenses can qualify for the Lifetime Learning Credit which is worth up to $2,000. The IRS does not even require you to pursue a degree. You can take a few courses to improve your job skills and still qualify for the credit! Alternatively, undergraduate students can benefit from the American Opportunity Tax Credit worth up to $2,500 per eligible student. You must choose one or the other when filing your tax return.
Save for retirement
Like it or not, you can not work forever so take advantage of your employers retirement, IRA, and 401(k) plan while you can. Any contributions you make to a 401K or similar program lowers your taxable income on your tax return. Plus, you will walk away with free money if they offer to match a percentage of your contributions. For 2023, the 401k contribution limit is $22,500, or $30,000 if you’re aged 50 or older. The annual contribution limit for an IRA is $6,500, or $7,500 if you’re aged 50 or older.
Pay for childcare
Paying someone to watch your kids while you go to work is expensive. In some areas, it can cost as much as a semester of college. The good news is your childcare expenses may help you qualify for the Child and Dependent Care Credit which can boost your tax refund. As part of the deal, parents can receive between 20 to 35 percent of their allowable expenses as a tax credit. The exact figure depends on your adjusted gross income. Before your mind starts running wild, there is a dollar limit on how much you can claim. Taxpayers with one child can claim up to $3,000 of expenses while those with two or more can claim up to $6,000. Qualifying expenses include:
- Daycare, nursery school or preschool
- Babysitter or licensed dependent care center
- Day camp
- Before or after school care
- The cost of a cook, maid, housekeeper or cleaning person for the care of the qualifying dependent
You must be able to give the provider’s name, address and taxpayer identification number. You cannot include expenses for overnight camps, summer school or tutoring programs. The Child and Dependent Care Credit can reduce your tax liability, so you pay no more than you owe, or get a higher refund.
At ezTaxReturn.com, we make it fast and ez to get your biggest possible refund!
