(NewsNation) — Many Americans count on their tax refund to make ends meet, and there are several things you can do to ensure you get as much money back as possible.
A recent Credit Karma survey found that 37% of taxpayers rely on their refund to get by, rising to 50% among millennials.
According to the IRS, the average tax refund in 2024 was $3,138, meaning thousands of dollars are potentially at stake when you file your federal tax return.
“It’s your single largest financial transaction each and every year,” said Mark Steber, chief tax information officer at Jackson Hewitt Tax Service. “The dollars involved have never been higher.”
Here are four things to keep in mind to maximize your tax refund.
1 – Choose the right filing status
Your filing status has a major impact on how much tax you owe. It determines your income tax bracket, the amount of your standard deduction and whether you’re eligible for certain credits and deductions.
Typically, your filing status is based on whether you were married or unmarried at the end of the calendar year (Dec. 31), but there’s more to it than that.
If you’re unmarried: Single versus head of household
Those who aren’t married but help provide for a child or another qualifying family member may be able to file as head of household — a special filing status that has several tax benefits.
For tax year 2024 (the tax returns you file in 2025), heads of household can claim a standard deduction of $21,900 compared to $14,600 for those filing as single, which lowers their tax liability. Taxpayers who claim head of household also have their income taxed at a more favorable rate than single filers.
To be eligible for head of household, you’ll need to have a qualifying dependent, a child or relative, who relies on you for financial support.
In most cases, a person can’t be claimed as a dependent on more than one tax return. You also can’t claim your spouse if you’re filing jointly.
And no, your pet dog doesn’t count either, even if it depends on you for survival.
If you’re unsure, the IRS has a tool to help you figure out your filing status here.
If you’re married: Filing jointly versus separately
Married couples can choose whether to file jointly, which involves a single return, or file separately, which means you and your spouse have your own filings with different incomes, deductions and credits.
For the majority of married couples, filing jointly makes the most financial sense. That’s because joint filers typically receive more tax benefits. They’re eligible for a larger standard deduction and are more likely to qualify for certain tax credits like the Child and Dependent Care Credit.
Lisa Greene-Lewis, a CPA and tax expert with TurboTax, summed up the benefits like this: “You can make more income but be taxed less because the tax brackets and the income ranges are larger if you’re married filing jointly.
However, there are some cases where a married couple may want to file separately.
For example, if you’re in the process of separating and don’t want to share your tax liability. Greene-Lewis said self-employment could be another reason married couples choose to file separately.
It may also make sense to file separately if you or your spouse has significant medical bills because doing so may help you clear the IRS threshold to deduct those expenses, according to TurboTax.
It’s important to get your married filing status right because choosing to file separately could disqualify you from tax benefits that you would otherwise be able to claim.
2 – Make the most of tax deductions
You can reduce your overall tax bill by taking deductions, which allow you to lower your taxable income and, therefore, the taxes you owe.
Tax filers have two main options: They can claim the standard deduction, a fixed amount set by the IRS, or choose to itemize deductions, which reduces their tax bill by accounting for specific expenses.
Most tax filers opt for the standard deduction because it’s easier and doesn’t require any proof. It’s the amount all taxpayers with earned income are eligible to deduct before paying any taxes.
You can see what the standard deduction is based on your filing status here.
Others may forego the standard deduction in favor of itemizing deductions, which offer a greater tax benefit for many, particularly homeowners.
That’s because itemizing deductions allows homeowners to write off expenses like mortgage interest and property taxes up to a certain amount. Tax filers can also deduct medical expenses, charitable donations and other expenses when they itemize.
If your total itemized deductions are greater than the standard deduction, then itemizing can result in a lower tax bill. But it tends to be more time-consuming and requires you to keep track of your expenses closely.
Also, don’t expect the IRS to tell you which deductions you should take.
“The IRS does not monitor that for you,” Steber said. “If you leave off a benefit, like a larger itemized deduction, it stays off until you go and amend it or fix it.”
Certain expenses are deductible whether you take the standard deduction or itemize. According to the IRS, those are:
- Alimony payments
- Business use of your car
- Business use of your home
- Money you put in an IRA
- Money you put in health savings accounts
- Penalties on early withdrawals from savings
- Student loan interest
- Teacher expenses
- For some military, government, self-employed and people with disabilities: work-related education expenses
- For military servicemembers: moving expenses
If you itemize, you can deduct these expenses:
- Bad debts
- Canceled debt on home
- Capital losses
- Donations to charity
- Gains from the sale of your home
- Gambling losses
- Home mortgage interest
- Income, sales, real estate and personal property taxes
- Losses from disasters and theft
- Medical and dental expenses over 7.5% of your adjusted gross income
- Miscellaneous itemized deductions
- Opportunity zone investment
3 – Take advantage of tax credits
It’s easy to confuse tax deductions and tax credits, but the two are not the same.
Unlike deductions, which reduce your taxable income, a tax credit is a dollar-for-dollar amount tax filers can claim that directly reduces the income tax they owe.
For example, if you owe $10,000 and you’re eligible for a $1,000 tax credit, that credit lowers your tax bill by $1,000 — to $9,000.
By comparison, a $1,000 deduction reduces your taxable income, not your tax bill directly, so if you’re in the 24% tax bracket, that works out to $240 in savings.
Steber called tax credits “the holy grail” of tax benefits and pointed out that they are not related to deductions, meaning you claim them regardless of whether you itemize or take the standard deduction.
Greene-Lewis emphasized the importance of having your records in order, especially if you have children.
“Kids are worth valuable deductions and credits, but you have to have the accurate Social Security number in order to get those,” she said.
A few common tax credits you may qualify for:
Earned Income Tax Credit (EITC): This is for low-to-moderate working individuals and families. The amount of the credit depends on your income, marital status, and the number of children you have. For tax year 2024, the maximum credit ranges from $632 for those without children up to $7,830 for tax filers with three or more qualifying children.
Child Tax Credit (CTC): You may qualify for this tax break if you have children under 17. For 2024, the credit is worth up to $2,000 per qualifying child. The amount you get depends on your income and how many children you have. You can learn more about the eligibility requirements here.
American Opportunity Tax Credit (AOTC): A credit for qualified higher education expenses like tuition, books and supplies. In 2024, you can claim up to $2,500 per eligible student. To be eligible, the student must be in their first four years of higher education.
4 – There’s still time to contribute to an IRA
Contributing to an individual retirement account (IRA) can lower your tax liability, and there’s still time to do it for the 2024 tax year.
Tax filers have until tax day, April 15, to make contributions to an IRA, which could lower their 2024 tax bill.
That’s because the so-called “traditional” IRA lets you contribute pre-tax dollars, which means you can deduct the amount you put in from your taxable income.
For 2024, you can contribute up to $7,000 to a traditional IRA (plus a $1,000 catch-up if you’re age 50 and over).
As long as you don’t exceed the $7,000 limit, you can designate any money you put in between now and tax day as a prior-year contribution.
Steber said the IRA is one of the only things you can do after the end of the calendar year to affect last year’s taxes.
“It is a time-tested and proven tax benefit,” he said, calling the IRA a “golden gem.”
There are a few limitations on IRA deductions. For example, you may need to reduce or entirely eliminate your IRA deduction if you or your spouse make a certain amount of money or are covered by a workplace retirement plan like a 401(k).
Also, contributions to Roth IRAs are not deductible.
