- 7 17 Staff
Effective Ways To Increase Your Tax Refund
Tax season is upon us! Filing taxes may seem like a hassle that you want to be done with quickly, but if you take your time and make sure you’re remembering deductions and applicable credits, you can maximize your tax refund while minimizing your tax liability.
Let’s take a look at some strategies you can use to potentially increase your tax refund. Keep in mind that this handy guide is for informational purposes only — we recommend consulting a tax advisor to address your unique circumstances.
Important Tax Dates to Remember
For most individuals, there are two upcoming important tax dates to remember.
April 18, 2023, is the tax filing deadline this year. It’s important to make this deadline (unless you requested an extension). Otherwise, there are consequences such as interest and penalties.
If you requested an extension to file your taxes, the next important date is October 16, 2023. This is the deadline for filing the extended tax return.
Ways to Increase Your Tax Refund
It’s important to make sure you do your research so you don’t pay more than required while taking advantage of every eligible tax break. Keep reading to find out the ways to increase your tax refund and reduce your tax bill.
1. Evaluate Standard vs. Itemized Deductions
A tax deduction is something you can subtract from your taxable income in order to lower the amount of taxes owed. There are two options: a standard deduction and an itemized deduction.
A standard deduction is based on your filing status and income. The standard deductions for 2023 are:
- Single or married and filing separately: $13,850
- Married filing jointly or surviving spouses: $27,700
- Head of household: $20,800
If your deductions would exceed the standard deduction and would lower your taxable income, then you should itemize your deductions.
2. Evaluate Your Potential Tax Deductions
Deductions reduce the amount of your taxable income when determining your adjusted gross income (AGI).
Some common deductions include:
- Student loan interest: You can deduct interest paid on student loans while still claiming a standard deduction. You can deduct up to $2,500 of necessary educational expenses such as tuition, required books, fees, room and board. You can’t be claimed as a dependent on someone else’s tax return to claim this deduction.
- Student loan cancellations: Under the American Rescue Plan Act of 2021, student loan debt that’s forgiven between December 31, 2020-January 1, 2026, is tax-free. The loan must have been made through a qualified lender for your attendance at an eligible educational institution.
- Business travel expenses: You can deduct travel expenses if you’re self-employed and have to travel from home temporarily for work, or if you’re an employee and must travel for your job.
- Charitable contributions: If you made charitable donations, you can claim them as a deduction if you have the receipt or other record of the donation.
- Casualty, disaster or theft losses: If the damage resulted from a disaster, you can claim damage to your household items, vehicles and house. The U.S. president must have declared the event a disaster in order for it to qualify as a deduction.
3. Evaluate Your Tax Credits
A tax credit is a dollar-for-dollar offset of your tax liability. Even if you are claiming a standard deduction, you can still claim tax credits. Tax credits include:
- Adoption credit: If you adopted an individual who is disabled or a child under 18, you’re entitled to tax benefits for qualified necessary expenses earned for the adoption.
- American opportunity tax credit: This is for qualified educational expenses paid by an eligible student who is the taxpayer, taxpayer’s spouse or taxpayer’s dependent. The student must be enrolled in classes at an eligible educational institution for at least one academic term and be enrolled at least half-time for the given tax year.
- Child tax credit: This is a tax benefit to help families who are raising children. This tax break is available for each qualifying dependent child under the age of 17.
- Child and dependent care tax credit: This credit helps families with a child under the age of 12, a spouse who is disabled or a qualified dependent. The amount of the credit is calculated by a percentage of your earned income.
- Earned income tax credit: This credit depends on your filing status, income and number of dependents. It’s a refundable tax credit for low-income workers with a dependent or those who are 19 or older, students 24 or older, or individuals who used to be homeless or were fostered.
- Lifetime learning credit: This credit is available for individuals who have incurred educational expenses such as tuition, books and fees within the given tax year.
Start Tax Season off Right
There are plenty of ways to increase your tax refund, and 7 17 Credit Union has resources that can help you through tax season and beyond.
To start the tax season off right, check out mistakes people make while filing a tax refund so you can avoid these common pitfalls.
For educational purposes only. 7 17 Credit Union does not offer tax advice. Please consult a tax professional.