In the United States, the deadline for filing federal income tax returns for individual taxpayers is April 15th.
However, because this year, April 15 falls on a Saturday and the following Monday is Emancipation Day, the filing deadline is April 18, 2023.
So yes, there is still some time before you decide what to file.
This means that you may have yet to discover a new way to boost your tax refunds and cut down the amount you owe to the government.
Here are a few ideas on how you can pay less in taxes without breaking any financial laws.
Check Your Filing Status
Your tax filing status can have an impact on your refund size, as it determines your standard deduction, tax brackets, and eligibility for certain tax credits and deductions.
For instance, if you are unmarried, your filing status is single.
For the tax year 2021, the standard deduction for single filers was $12,550, but your tax bracket depends on your income level.
While this category may seem the bleakest one, there are still ways to save on taxes, so it’s best to ask a tax lawyer about this.
On the other hand, if you are unmarried and have children under your care, you may qualify for the Head of Household filing status.
For the tax year 2021, the standard deduction for this category was $18,800, but there is an entire list of tax deductions that applies as well.
Lastly, married couples have the option of filing jointly with their spouse or separately.
As a rule of thumb, married people who file jointly will pay less in taxes than the ones who file separately.
However, your tax bracket also changes since it depends on your combined income.
Your refunds may increase even further if you have children.
Overall, the best way to ensure that you receive the maximum refund possible is to accurately report all income, claim all eligible deductions and credits, and ensure that your tax withholdings are appropriate for your income level.
The IRS provides all the necessary information online, but you should also talk to a tax lawyer to make sure you’ve understood everything correctly.
Stay Up to Date with Tax Deductions
While most people know the IRS offers tax deductions, most don’t know about all the possibilities and how these change depending on your filing status and income bracket.
So here are some of the most overlooked tax deductions you can benefit from.
These are deductions that you can take if your total deductible expenses exceed the standard deduction.
For instance, you can deduct up to $10,000 in combined state and local income, sales, and property taxes, or you can deduct the interest paid on up to $750,000 of mortgage debt for your primary residence and one other qualified residence.
Charitable contributions and Medical and dental expenses also fit this category.
These are deductions that you can take before calculating your adjusted gross income (AGI), which can help reduce your tax liability.
For example, teachers can deduct up to $250 in unreimbursed expenses for classroom supplies.
You can also deduct up to $2,500 in interest paid on qualified student loans or contributions to your HSA.
Tax credits directly reduce your tax liability, and some are refundable, which means you can receive a refund even if you don’t owe any taxes.
In this category, you can include credits like the EITC, CTC, and AOTC.
Timing is Also a Factor
While filing early and making sure all your taxes are paid on time is beneficial for your mental health, this is more about payments and contributions you can make before the end of the year to reduce your taxable income.
For instance, before the clock strikes midnight on December 31st, you may discover a few extra purchases that qualify for deductions.
It also helps to schedule medical procedures and exams for the fourth quarter of the year, and if you can pay your January mortgage in December, that would be great.
The tax system in the US is complex and difficult to understand by a regular individual.
However, if you stay up to date with the terms and make sure your filing status and tax deductions are filled in correctly, it should be easy to boost your refund.
It also helps to talk with a tax specialist to get a better understanding of your financial situation.