Can I Get an Estimate on My Tax Refund? Here’s How to Calculate It
Learn how to estimate your tax refund by reviewing income, deductions, and credits, while considering factors that may affect your final amount.
Figuring out your tax refund helps with financial planning. While the IRS provides the official amount after processing your return, you can estimate it by reviewing income, deductions, and credits.
By breaking down these factors, you can get a clearer picture before filing.
Gathering Your Income Details
Start by determining your total taxable earnings for the year, including wages, self-employment income, rental earnings, and other sources contributing to your adjusted gross income (AGI). W-2 employees can refer to their year-end Form W-2, while freelancers and independent contractors receive Form 1099-NEC or 1099-K and must account for business expenses separately.
Other taxable income includes interest, dividends, capital gains, unemployment benefits, and certain Social Security payments. Withdrawals from retirement accounts like a 401(k) or IRA may also be taxed, especially if taken early.
Pre-tax contributions can lower taxable income. Contributions to employer-sponsored retirement plans, Health Savings Accounts (HSAs), and Flexible Spending Accounts (FSAs) reduce the amount subject to federal tax. Employer-provided commuter benefits can also help.
Evaluating Deductions for Your Estimate
Deductions lower taxable income, affecting your refund. The first decision is whether to take the standard deduction or itemize. For 2024, the standard deduction is $14,600 for single filers, $29,200 for married couples filing jointly, and $21,900 for heads of household. If deductible expenses exceed these amounts, itemizing may be more beneficial.
Common itemized deductions include mortgage interest, state and local taxes (SALT), and medical expenses exceeding 7.5% of AGI. Charitable contributions are deductible, with donations over $250 requiring documentation. Those with high medical costs or property taxes may benefit from itemizing.
Some deductions apply even if you don’t itemize. Educators can deduct up to $300 for classroom supplies. Self-employed individuals can claim home office expenses, business mileage, and health insurance premiums. Student loan interest is deductible up to $2,500. Contributions to traditional IRAs or HSAs can also reduce AGI.
Reviewing Credits That Could Boost Your Refund
Tax credits reduce tax liability and can increase refunds. Some are refundable, meaning they generate a refund even if no tax is owed, while others are nonrefundable and only reduce tax liability to zero.
The Earned Income Tax Credit (EITC) is refundable and helps low- to moderate-income workers. Eligibility depends on income, filing status, and the number of qualifying children. For 2024, the maximum EITC ranges from $632 for taxpayers without children to $7,830 for those with three or more dependents.
Families with dependents may qualify for the Child Tax Credit (CTC), which provides up to $2,000 per child under 17, with up to $1,600 refundable through the Additional Child Tax Credit (ACTC). The credit phases out for single filers earning over $200,000 and joint filers earning over $400,000. A separate Credit for Other Dependents (ODC) offers up to $500 for dependents who don’t qualify for the CTC, such as elderly parents or college-aged children.
Education-related credits can reduce tax liability. The American Opportunity Tax Credit (AOTC) provides up to $2,500 per eligible student for tuition, fees, and course materials in the first four years of postsecondary education, with up to $1,000 refundable. The Lifetime Learning Credit (LLC) offers up to $2,000 per tax return for education expenses but is nonrefundable. Both credits phase out at $80,000 for single filers and $160,000 for joint filers.
The Saver’s Credit benefits low- and moderate-income workers who contribute to retirement accounts. Depending on income and filing status, this nonrefundable credit covers 10%, 20%, or 50% of contributions up to $2,000 ($4,000 for married couples filing jointly).
Estimating Your Overall Liability and Potential Refund
Your refund depends on your total tax liability, which is the amount owed before factoring in payments already made. The IRS uses a progressive tax system, taxing different portions of income at increasing rates. For 2024, the lowest bracket taxes income up to $11,600 at 10%, while the highest bracket applies a 37% rate to earnings over $609,350 for single filers ($731,200 for married couples filing jointly). Knowing your income bracket helps estimate the base tax owed.
Subtracting tax payments made throughout the year refines the estimate. This includes federal income tax withheld from paychecks, quarterly estimated tax payments made by self-employed individuals, and any excess Social Security tax withheld if you worked multiple jobs. Overpaying results in a refund, while underpaying may lead to a balance due.
Factors That Might Change Your Final Amount
Even after estimating your refund, various factors can alter the final amount once your return is processed.
IRS adjustments can occur if there are discrepancies between your reported income and what third parties, such as employers or financial institutions, have submitted. If the IRS finds errors, they may correct them, which could increase or decrease your refund. Additionally, past-due federal or state taxes, child support, or certain government debts like student loans may be deducted from your refund through the Treasury Offset Program.
Timing also plays a role. Filing early doesn’t guarantee a faster refund if your return is flagged for review. The IRS may delay refunds for returns claiming the Earned Income Tax Credit or Additional Child Tax Credit due to fraud prevention measures. If you make estimated tax payments, any underpayment penalties could also reduce what you receive.