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If you want a bigger tax refund in 2023, or any other year, you may be able to get it by changing your filing status or claiming credits and deductions you may be missing out on. This is your guide.
Understanding tax refunds
At the most basic level, a tax refund is money you get from the IRS when your annual tax return reveals you’ve paid them more than you owe. On the flip side, if you owe more than you’ve paid, you have to pay them the difference.
Almost all the information included in your tax return affects the size of your refund—if it didn’t, the IRS would not ask about it—and not all of it is within your control. But you may be able to maximize the size of your 2023 tax refund this year by answering certain tax return questions more accurately, making more tax-deductible contributions, or claiming more credits.
Simple strategies for increasing refunds
There’s a lot of information below about how you can take advantage of the ins and outs of the tax code to maximize your refund. Before we get into it, here are some strategies we’ve learned over the past 40 years that are less about your tax return and more about your approach to filing.
- Don’t wait until the last minute. Your refund will be the same size no matter when you file, but if you are rushing at the last minute, you are more likely to make mistakes and omissions that cost you money.
- Don’t miss deadlines. If you file late, you might have to pay penalties. Even if you file an extension, you may have to pay penalties and interest.
- Get organized before you start. When you have your tax forms, receipts, and other paperwork in order, it’s easier to complete your tax return. That makes it easier to get it right.
- File with a Jackson Hewitt Tax Pro. We can’t promise to make your refund bigger than it was last year, but we will get you the biggest possible refund every year, guaranteed. If we don’t, you get your money back, plus $100 of our money.
Now, let’s get into the nitty-gritty.
Determine your filing status
We don’t recommend making decisions about life, love, and marriage just to get a bigger refund, and lying to the IRS about your marital status is illegal. But your filing status is closely tied to your marital status and directly affects your tax rate and the credits and deductions you qualify for.
If you are eligible to use more than one filing status, using the right one could lead to a bigger refund. A Jackson Hewitt Tax Pro can help you decide which option could put more money in your pocket.
Bonus tip: Make sure your W-4 is correct. The W-4 form you fill out for your employer determines how much money is withheld from your paycheck for taxes. If your life has changed—you got married, you’re no longer someone’s dependent, etc.—and your W-4 has not, you may be withholding less than you should. When that happens, you may owe taxes instead of getting a refund.
A Jackson Hewitt Tax Pro can help you figure out what filing status makes sense for you. Usually, your Human Resources department can help you update your W-4.
Making tax-deductible contributions
Giving money away or saving it may help increase the size of your refund. That’s because certain contributions to retirement and health care savings accounts can reduce your taxable income, and donations to charity can, too.
On average, every $25 reduction in your taxable income lowers your taxes by about $5 per $25. That means you could add $100 to a $1,000 tax refund by making $125 in tax-deductible contributions throughout the year.
- Contributions to retirement savings. When you make tax-deductible contributions to a traditional IRA, 401(k), 403(b), and other, less common retirement accounts, that money does not count toward your taxable income. Lowering your taxable income generally reduces how much you’re going to owe in taxes. And it’s still your money!
- Contributions to health savings accounts. Like retirement account contributions, money you put in a health savings account (HSA) is deducted from your taxable income, generally reducing how much you’re going to owe in taxes. HSAs are available to people with high-deductible health care insurance plans (HDHP), and you can withdraw money tax free for a range of medical and health-related expenses.
- Contributions to charity. Donating money and property, such as clothing or furniture, to charitable organizations can also increase your refund by reducing your taxable income. It’s a win-win: you support causes you care about and you owe less to the IRS.
The IRS must recognize the organization you donate to as a qualified organization. You must itemize (i.e., list out) all your deductions on your tax return and keep receipts, which can be a hassle. And, your charitable contributions must be worth more than the standard deduction for itemizing them to be worthwhile. For more details, read Tax Incentives of Charitable Donations.
Itemize your deductions
How you claim deductions on your tax return can dramatically change the size of your tax refund. Most people can either take the standard deduction or itemize their deductions.
The standard deduction is, essentially, a minimum deduction. It is a fixed dollar amount, determined by the IRS, that reduces the amount of income on which you’re taxed. The size of the standard deduction you qualify for depends on your filing status, your age, whether another taxpayer can claim you as a dependent, and whether you are blind.
The alternative to the standard deduction is to select deductions one by one. Itemizing your deductions this way leads to a total deduction amount you can subtract from your adjusted gross income. Itemized deductions that taxpayers may claim include the following:
- Unreimbursed medical or dental expenses that exceed 7.5% of adjusted gross income
- State and local income or sales taxes
- Real estate and personal property taxes
- Home mortgage interest
- Gifts to a qualified charity or non-profit
- Personal casualty and theft losses from a federally declared disaster
- Charitable contributions
It’s usually a good idea to choose whichever type of deduction will reduce your taxable income more, which means choosing whichever one is bigger. If your total allowable itemized deductions add up to more than your standard deduction, itemize. If not, take the standard deduction.
In certain cases, IRS rules require you to itemize deductions because you are not allowed to use the standard deduction.
Credits and deductions
If you think taxes are complicated, you’re right. All of the following credits and deductions can also affect your refund and are worthy of their own articles (in fact, follow the links to articles about them). It’s also why it could be smart to talk to a tax preparer, so you don’t miss any.
- Earned Income Tax Credit
The Earned Income Tax Credit (EITC or EIC) is one of the largest credits available, worth up to more than $7,000 in 2023 for a family of five. It is specifically for low- to moderate-income earners. Sometimes, the credit is worth more than the amount of income you received in the first place. However, the IRS says 20% of eligible taxpayers don’t claim it.
- Child Tax Credits
If you have earned income and children aged 16 or younger, you may be able to claim Child Tax Credits. The Child Tax Credit (CTC) is worth up to $2,000 for each qualifying child, depending on your income. If there is any of the child tax credit remaining, you may also be eligible for the Additional Child Tax Credit (ACTC). The maximum Additional Child Tax Credit is $1,500 per child.
- Child and Dependent Care Credit
If you paid for childcare or other dependent care services so that you could work, or look for work, you may be eligible for the Child and Dependent Care Credit. This credit is also available if you pay for care for a disabled spouse or dependent above the age of 12.
- Saver’s Credit
The Saver’s Credit, formally called the Retirement Savings Contributions Credit, is available to low- to moderate-income earners saving for retirement in eligible retirement accounts. While it will not directly increase the size of your refund—it’s “non-refundable”— it can reduce your total income taxes. As a result, it can either reduce what you must pay or allow more of your withholding to go toward a possible refund.
- Deductions and credits for teachers and educators
The IRS provides tax deductions and credits for teachers and educators that can help you offset the cost of classroom supplies you’ve purchased, or tuition you’ve paid for professional and continuing education.
- Contributions to a traditional 401(k)
As mentioned above, you may be able to take a deduction for contributions you make to a traditional IRA. This allows you to save for retirement while potentially increasing your refund today.
- Student loan deductions
Have a student loan? You may be able to deduct up to $2,500 in interest paid. There are income and filing status restrictions, but it can be another great benefit to investing in an education for you, your spouse, or a dependent.
- Self-employment deductions
If you have self-employment income—from side gigs, freelancing, contracting, a small business you own, farming income—you must pay your own Medicare and Social Security taxes. There is no “employer” withholding these taxes, so the IRS allows you to deduct half of the total taxes you pay from your taxable income.
There are many other credits and deductions available. You can use all of them to potentially boost your refund, reduce your taxable income, or reduce how much you owe the IRS.
Talk to a Jackson Hewitt Tax Pro about which credits, deductions, and approaches to filing might increase the size of your tax refund. We’re here all year to help.
About the Author
Jo Willetts, Director of Tax Resources at Jackson Hewitt, has more than 35 years of experience in the tax industry. As an Enrolled Agent, Jo has attained the highest level of certification for a tax professional. She began her career at Jackson Hewitt as a Tax Pro, working her way up to General Manager of a franchise store. In her current role, Jo provides expert knowledge company-wide to ensure that tax information distributed through all Jackson Hewitt channels is current and accurate.