It’s hard to imagine that anyone enjoys preparing their tax return, but the prospect of a big refund can make it worthwhile. To maximize your tax refund, you need to be smart about how you file.
“Take advantage of any and all tax credits you’re eligible for,” says Kenneth Chavis IV, a senior wealth advisor with Versant Capital Management in Phoenix.
What’s more, you want to be sure there are no errors on your tax return that could end up costing you money. To avoid that, here are some strategies to ensure you get the largest refund possible in 2024:
— Select the right filing status.
— Don’t overlook dependent care expenses.
— Itemize deductions when possible.
— Contribute to a traditional IRA.
— Max out contributions to a health savings account.
— Claim a credit for energy-efficient home improvements.
— Consult with a new accountant.
[READ: Tax Prep Checklist: Collect These Forms Before Filing Your Taxes.]
Select the Right Filing Status
Your filing status determines your standard deduction amount as well the income thresholds used for some credits and deductions. The status you use could significantly alter your refund.
For instance, a person is allowed to file as a qualifying widow(er) for the two years after their spouse’s death. This status nearly doubles the standard deduction someone would receive if they filed as single.
Married couples can also choose between filing jointly or separately. “Ninety-nine times out of 100, if you are a married couple, you’re better off filing jointly,” says Riley Adams, a certified public accountant and founder of the finance website WealthUp.
Only in rare instances will filing separately save a married couple money. For example, if one spouse has high medical expenses that they would like to itemize, the couple’s combined income might make itemization impossible, Adams says.
Don’t Overlook Dependent Care Expenses
If you claim dependents on your tax return, you can receive a $2,000 child tax credit for each one younger than age 17. The full credit is available to taxpayers with incomes of up to $200,000 for single filers and $400,000 for those married and filing jointly. A partial credit may be available to those with higher incomes.
[Read: What Is the Child Tax Credit?]
While the child tax credit is commonly claimed, don’t overlook your chance to receive an additional tax credit for your day care costs. The child and dependent care credit is worth up to 35% of the first $3,000 spent on qualifying care for one child or $6,000 spent on qualifying care for two or more children.
To get the maximum credit, you’ll need an income of less than $15,000. Then, the percentage slowly declines until it hits 20% of expenses for taxpayers earning $43,000 or more.
Qualifying expenses can include day care, before- and after-school programs, summer day camps and sports camps (although not overnight camps). To qualify, the care needs to be provided so you can work.
While most people claim this credit for children 12 and younger, it is also possible to claim it for older disabled children or even an elderly parent.
Itemize Deductions When Possible
The Tax Cuts and Jobs Act of 2017 significantly increased standard deductions to the point where most people no longer itemize. However, if you have significant charitable contributions or medical expenses, it’s worth investigating whether you could save money by itemizing your deductions.
[A Guide to Tax Deductions for Charitable Donations]
If itemizing this year doesn’t make sense, consider whether there is a way to change your spending so you can itemize in a future year. Bunching several years’ worth of charitable contributions into a single year may be the most common way to do that.
“The donor-advised fund takes care of that,” says Chris McMahon, president and CEO of Aquinas Wealth Advisors in Pittsburgh. By creating a donor-advised fund, people can make a large initial deposit for charitable giving. That deposit can be itemized on tax returns, but then the funds can be distributed to charities over a period of years.
Contribute to a Traditional IRA
Retirement funds are a prime way to save money on taxes. “Some of the best ways people can maximize their refund is to contribute to pre-tax accounts,” Chavis says.
While it is too late to contribute to your workplace 401(k) to save on your 2023 tax bill, you can still fund an IRA up to the tax filing deadline, which is April 15 in 2024. If you are younger than 50, you can contribute up to $6,500 to an IRA for the 2023 tax year. The limit is $7,500 for those 50 and older.
Be sure you’re contributing to a traditional IRA, though, and not a Roth IRA. Contributions to Roth accounts are not tax deductible, although these IRAs have their own set of tax benefits.
Also, if you have a workplace retirement plan, such as a 401(k), the ability to deduct IRA contributions begins to phase out for single and head of household filers once their modified adjusted gross income reaches $73,000. For married couples filing jointly and qualifying widow(er)s who have workplace plans, the full traditional IRA deduction is available only to those earning $116,000 or less.
Contribute to a Health Savings Account
If you have a qualifying high deductible health insurance plan, you can save on your taxes by contributing to a health savings account, or HSA. These accounts allow people to put aside money for medical expenses, and they come with triple tax savings. Contributions are deductible, money in the account grows tax-free and withdrawals are tax-exempt when used for qualifying expenses.
As with a traditional IRA, deductible contributions to an HSA can be made through the tax filing deadline.
For the 2023 tax year, those with a qualified family health insurance plan can deduct HSA contributions of up to $7,750, while taxpayers with individual plans can deduct up to $3,850. With either type of insurance, those who are 55 or older are entitled to make an additional $1,000 in deductible contributions.
[Read: How to Choose a Health Savings Account.]
Claim a Credit for Energy-Efficient Home Improvements
Thanks to the Inflation Reduction Act of 2022, you may be entitled to a tax break for improvements that increased your home’s energy efficiency.
“It took credits that had expired in 2021 and extended them,” Adams says. That means those who made energy-efficient upgrades such as new windows, exterior doors or added insulation can claim a credit on this spring’s tax return.
If you plan to claim a credit for energy-efficient home improvements, Adams advises keeping all documentation from each purchase in case the IRS needs to verify its eligibility.
“The IRS doesn’t have to audit you,” he says. “They could contact you to ask for clarification.”
Consult With a New Accountant
If you’ve been using the same tax professional for years, it might be time to have a fresh set of eyes look over your return. After many years, a tax accountant might not be proactively looking for savings.
A new accountant may provide a more robust review of a person’s tax situation and, in some cases, be able to amend past returns to garner larger refunds from previous years.
“We’ve seen clients pick up a couple thousand bucks,” McMahon says of those who came to his firm for a fresh look at their returns.
Whether you use an accountant or prepare your own tax return, remember that the tax code is always changing and your opportunities for savings may change yearly as well.
More from U.S. News
Every 2024 Tax Deadline You Need to Know
How to File Taxes When You’re Self-Employed
How to Get the Biggest Tax Refund in 2024 originally appeared on usnews.com
Update 01/31/24: This story was published at an earlier date and has been updated with new information.
