Welcome to the topic “How to Get the Maximum Tax Refund?”
Paying taxes is probably one of the hardest things an individual has to do when they begin adulthood. When paying these taxes, people are usually very thorough due to the serious legal implications, but we can end up being a little less thorough when it comes to getting the maximum tax returns, we can.
Many people miss out on possible deductions when attempting to maximize their tax refund, either because they are unaware of them or because they aren’t as organized when it comes to this matter. It takes some essential tax planning, study, and thoughtfulness to lay the foundation for a tax refund.
This is why you have come to the right place! Here, we shall discuss a few different ways you can get the maximum tax refund.
How To Get the Maximum Tax Refund
Recheck Your Filing Status
You should always check your filing status, and have it changed to one that suits your particular situation. Your filing status can actually make a big difference when you’re trying to get your tax refund.
The five filing statuses are as follows:
- Married Filing Jointly
- Married Filing Separately
- Head Of Household
- Qualifying Widow(er) With Dependent Child
Your filing status has an impact on the following factors:
- Deductions for standard deductions
- Your prerequisites for filing
- The credits that you are eligible for
- The amount of tax you pay
- The amount of a refund you get
Standard Deduction Vs. Itemized Deduction
Another way to get a maximum tax refund is to opt for an itemized deduction. Because the standard deduction nearly doubled and some tax deductions were removed or decreased as a result of tax reform, more people may opt for the standard deduction rather than itemizing.
Although the changes may cause more taxpayers to use the standard deduction, which will help decrease your taxes, you may still be able to itemize your deductions to obtain a larger tax refund if you take the time to gather some of your receipts. If you’re on the verge of exceeding the standard deduction, don’t forget about any additional expenses that could put you over the line.
Earned Income Tax Credit
The Earned Income Tax Credit is available to working families, individuals, self-employed workers, and those with a modest to low income. The Earned Income Tax Credit reduces your tax liability and may even entitle you to a refund. Even if you owe no taxes, you must file a tax return to collect the EITC.
The people entitled to the Earned Income Tax Credit must fall into the following criteria:
- Possess a current Social Security number
- To file jointly, you must be a U.S. citizen, a year-long resident alien, or a nonresident alien married to a U.S. citizen or resident alien.
- Have a source of income via self-employment, an employer, or farm work.
- You must not be someone else’s claimed dependent or child.
- Have a qualifying kid and be between the ages of 25 and 65, with at least half of the year spent in the United States.
Refundable Tax Credits
Refundable Tax Credits are another way to get the maximum tax refund. A tax credit reduces your tax responsibility dollar for dollar, while a refundable tax credit allows you to obtain a credit that exceeds your tax liability. According to the IRS, one out of every five taxpayers who are eligible for the credit does not claim it.
Because of changes in their income, some taxpayers are no longer eligible for this crucial credit. Alternatively, if their income is below the IRS income-filing level, they may choose not to submit their taxes.
Child and Dependent Care Credit
The Child and Dependent Care Credit is calculated as a proportion of the cost of caring for a qualifying child or dependent.
The American Rescue Plan makes significant modifications to the amount and method of claiming the child and dependent care tax credit for 2021. The plan raises the amount of creditable expenses, softens the credit reduction due to income levels, and makes the credit entirely refundable. This implies that, unlike in previous years, even if you don’t owe taxes, you can still obtain the credit.
The following individuals are entitled to this credit:
- Your child, if they are under the age of thirteen.
- A dependent who stays with you for more than half the year and is physically or psychologically incapable of self-care.
- Your partner is incapable of self-care and spends more than half the year with you.
Other requirements must be satisfied in order to receive the credit:
- If you’re married, you must file a joint tax return.
- You can’t utilize a caregiver who is the child’s spouse or parent, your child under the age of 19, or another one of your dependents.
- A Social Security number must be entered into your return for each qualifying dependent and child.
- Your caregiver’s name, address, and Social Security number must be provided.
Above-The-Line Tax Deductions
You can minimize your taxable income without itemizing by taking advantage of above-the-line tax deductions.
Those who are entitled include some of the following examples:
- Self-employment tax paid.
- Interest on student loans paid.
- Made a contribution to your IRA.
- If you are an active-duty military member, you may have unreimbursed relocating fees.
If you received assistance to help pay for insurance in the health insurance marketplace, the reduction in your taxable income may also help you secure a more considerable advanced premium tax credit.
Supporting A Dependent
You may be eligible to claim your friend, significant other, or relative as a dependent if you have been supporting them. There are some restrictions on who is eligible, but if your non-relative has lived with you for the full year, does not provide more than half of their own support, and did not earn more than four-thousand dollars in taxable income, in 2020, the deduction is valid.
These were just some of the ways you can use to get your maximum tax refund. After all, your hard-earned money is very important, and it is your right to get back what you deserve and have worked so hard to earn. With some more research into this topic, you are sure to be satisfied with your tax refund.
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