Tips to maximize your tax return

What is a tax return?

Every year, taxpayers are responsible for filing their taxes. A tax return is a form that lists your income and how much you’ve paid in taxes for that year. Once you file, the IRS and your state government review and determine whether you owe the government more money, or whether you overpaid and they owe you money. If the government owes you money, you’ll get it back through a tax refund.

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How to maximize your tax return

If you’re seeking ways to maximize your tax return, you’re not alone – after all, no one wants to pay more than necessary. Maximizing your tax return means that you file your taxes in a way that grants you a bigger tax refund or a larger tax deduction. Follow these tips to learn how you can get a bigger tax return.

1. Figure out your available deductions and exemptions

A tax deduction reduces your taxable income. Common deductions include:

• Business expenses, if you own a business
• Charitable donations
• Interest on student loans
• Interest on your home mortgage
• Home office deductions, if you use your home as a workspace

Tax exemptions can either reduce the amount of taxes you pay or eliminate your duty to pay them. If you own a business that is for-profit, you won’t qualify for tax exemption. Examples of common organizations that may qualify for tax exemptions include:

• Charitable organizations
• Religious organizations, like churches, can qualify for tax exemptions
• Social welfare organizations

While it’s more difficult to qualify for a tax exemption, you may be able to qualify for tax deductions. You can view potential deductions for individuals and deductions for businesses on the IRS website. You may be eligible for work-related deductions, itemized deductions, education deductions, health care deductions, or investment-related deductions. Taking the deductions you qualify for is a simple way to maximize your tax return.

2. Review your filing status

One of the first steps to filling out your tax return is indicating your filing status, which is one factor in determining what you owe in taxes and what kind of refund you’ll receive. The different filing options include:

• Single
• Married filing jointly
• Married filing separately
• Head of household
• Qualifying widower

In most cases, if you’re married, it’s best to file jointly. But in some cases, like if your spouse has large medical expenses, it can be better to file separately. For example, in 2022 the IRS allowed taxpayers to receive a tax deduction if their out-of-pocket medical expenses exceed 7.5% of AGI (Adjusted Gross Income).¹ If your spouse faced a medical issue but filed with you, they wouldn’t be eligible for that tax deduction.

For some couples, filing together may put them in a higher tax bracket. In a higher tax bracket, you’ll be taxed for a larger portion of your income. In this case, you’d probably want to avoid that by filing separately.

Unmarried taxpayers often forget about the option to file as head of household. If you provided over half of an elderly parent’s financial support, even if they don’t live with you, you can file as head of household and enjoy greater tax deductions. Unmarried taxpayers can also qualify to file as head of household if they supported a child financially who lived with them for at least six months.²

3. Maximize your retirement savings

If you have retirement savings in a 401(k), you can use it to protect your taxable income. When you add money to your 401(k), your contributions don’t get taxed. By adding money to your 401(k), you can lower your taxable income to pay less on taxes. Adding pre-taxed money to a traditional IRA can also lower your taxable income.

4. Explore which tax credits you’re eligible for

Tax credits give taxpayers a dollar-for-dollar reduction on their taxable income. For example, if you owe $2,000 in taxes but qualify for a $2,000 tax credit, you won’t owe that $2,000. You can receive tax credits for having children, adopting a child, attending a qualified college or university, having a solar-powered home, or even owning an electric vehicle. It’s worth your time to browse the possible tax credit options on the IRS website to find any you qualify for.

Researching all the credits, deductions, and exemptions available to you is a worthwhile tax season endeavor for savvy savers. Should you need some extra help, seek a qualified accountant near you who can help you file and save money.

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