How to Get More Money on Your Tax Return

Navigating tax regulations can seem complex, but understanding key provisions can significantly impact your financial well-being. “Getting more money on your tax return” means strategically reducing your tax liability, which can result in a larger refund or a lower amount owed. Effective tax planning involves knowing the available deductions, credits, and filing strategies to ensure you pay only what you legally owe. By utilizing these provisions, taxpayers can maximize their financial benefit and improve their overall fiscal health.

Reducing Your Taxable Income

Reducing your taxable income is a key step in lowering your overall tax liability, as it directly reduces the tax calculation. Several avenues exist for taxpayers to achieve this reduction, primarily through deductions.

Taxpayers choose between taking the standard deduction or itemizing their deductions. The standard deduction is a fixed dollar amount that reduces your taxable income and varies based on your filing status. For the 2024 tax year, the standard deduction is $14,600 for single filers and married individuals filing separately, $29,200 for married couples filing jointly and qualifying surviving spouses, and $21,900 for those filing as Head of Household. An additional standard deduction amount is available for taxpayers who are age 65 or older or blind, adding $1,950 for single or head of household filers and $1,550 for married taxpayers in 2024.

Alternatively, taxpayers can itemize deductions if their eligible expenses exceed their standard deduction amount. Common itemized deductions include state and local taxes, home mortgage interest, charitable contributions, and medical expenses. Medical expenses can be deducted if they exceed 7.5% of your Adjusted Gross Income (AGI). Accurate record-keeping, including receipts and statements, is important to substantiate any itemized deductions claimed.

Beyond choosing between standard and itemized deductions, certain “above-the-line” deductions reduce your Adjusted Gross Income (AGI). Contributions to a traditional Individual Retirement Arrangement (IRA) can be deducted, with a maximum contribution of $7,000 for 2024, or $8,000 if you are age 50 or older. Deductibility may be subject to income limitations.

Contributions to a Health Savings Account (HSA) are another above-the-line deduction. For 2024, individuals with self-only high-deductible health plan (HDHP) coverage can contribute up to $4,150, while those with family HDHP coverage can contribute up to $8,300. An additional $1,000 catch-up contribution is permitted for individuals age 55 or older.

The student loan interest deduction allows eligible taxpayers to reduce their taxable income by up to $2,500 of interest paid on qualified student loans. This deduction is available even if you do not itemize, but it is subject to income phase-outs.

Leveraging Tax Credits

Tax credits directly reduce the amount of tax you owe, dollar-for-dollar, making them beneficial. This differs from deductions, which only reduce your taxable income. Credits are categorized as either refundable or non-refundable; non-refundable credits can reduce your tax liability to zero, but any remaining credit is not returned as a refund, while refundable credits can result in a refund even if no tax is owed.

The Child Tax Credit (CTC) offers up to $2,000 per qualifying child for the 2024 tax year. A child must be under age 17 at the end of the tax year to qualify. A portion of this credit, known as the Additional Child Tax Credit (ACTC), is refundable, allowing eligible families to receive up to $1,700 per qualifying child as a refund, even if they owe no tax.

The Earned Income Tax Credit (EITC) is designed for low-to-moderate income working individuals and families. The maximum credit amount for 2024 varies based on income, filing status, and the number of qualifying children. It ranges from $632 for those without children to $7,830 for those with three or more children.

Education credits can help offset the costs of higher education.

The American Opportunity Tax Credit (AOTC) provides a maximum credit of $2,500 per eligible student for the first four years of higher education. Up to 40% of the AOTC, or $1,000, is refundable.

The Lifetime Learning Credit (LLC) offers up to $2,000 per tax return, calculated as 20% of the first $10,000 in qualified education expenses. Unlike the AOTC, the LLC can be claimed for any year of post-secondary education, including graduate studies and courses taken to acquire job skills, and there is no limit on the number of years it can be claimed. Both education credits are subject to income phase-outs.

The Child and Dependent Care Credit assists taxpayers who pay for the care of a qualifying individual to enable them to work or look for work. Eligible expenses are capped at $3,000 for one dependent and $6,000 for two or more dependents for the 2024 tax year. The credit amount is a percentage of these expenses, ranging from 20% to 35% depending on your Adjusted Gross Income.

Energy-efficient home improvements can also yield tax credits.

The Energy Efficient Home Improvement Credit allows a credit of 30% of the cost of qualified energy-efficient improvements made to your home. This credit has an annual limit of $1,200 for most improvements, with a separate annual limit of $2,000 for heat pumps, biomass stoves, and biomass boilers.

The Residential Clean Energy Credit offers a 30% credit for the cost of new, qualified clean energy property like solar, wind, and geothermal equipment installed in your home.

Optimizing Your Tax Filing

Strategic decisions made during the tax filing process can impact your tax outcome. Selecting the optimal filing status directly affects your standard deduction amount and the tax brackets applied to your income. The available statuses include Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow(er).

Maintaining accurate and organized financial records throughout the year is important for tax optimization. Keeping accurate records of income statements, receipts for deductible expenses, and documentation for credit eligibility simplifies the tax preparation process. These records also serve as important evidence if your return is selected for review by the tax authorities, ensuring you can substantiate all claims made.

Adjusting your tax withholdings during the year can influence your refund or amount owed at tax time. By reviewing and updating your Form W-4 with your employer, you can modify the amount of income tax withheld from each paycheck. This allows you to align your withholdings with your tax goals, whether that means receiving a larger refund at the end of the year or having more take-home pay throughout the year. Periodically re-evaluating your W-4, especially after life events like marriage, divorce, or the birth of a child, helps prevent over or under-withholding.

Before submitting your tax return, a thorough review is a final, important step. Carefully checking for any mathematical errors, overlooked deductions, or missed credits can prevent mistakes and ensure you claim every benefit you are entitled to. This comprehensive review helps confirm the accuracy of your return and maximizes your financial benefit.