It’s that time of the year again – tax season! We know filing taxes may be a dreaded activity for some people but it doesn’t have to be stressful! We’ve gathered 5 easy steps for maximizing your tax return this year.
1. Double-check your filing status
Your filing status greatly affects your tax return and is determined by your relationship status as of December 31st of that filing year.
Here are all the possible filing statuses:
- Head of household
- Married, filing jointly
- Married, filing separately
- Qualifying widower
It’s important to weigh what filing status is the best for you in order to maximize your tax return.
For instance, most married couples file jointly but that doesn’t always guarantee the biggest return. If you’re married, you can file separately or jointly.
If you’re single, you could possibly file as single, head of household, or qualifying widower, if applicable.
If you could possibly file two ways, you should calculate your taxes both ways to see which gets you a bigger return. Make sure not to officially file your taxes before you decide as you can only file once.
2. Take advantage of tax credits
There are a lot of tax credits that most people don’t take advantage of because they aren’t aware of them. Tax credits will help you minimize deductions as they’re a dollar-for-dollar deduction on your taxes. Here are a few tax credits you should look into:
- Earned Income Credit
- The American Opportunity Credit
- Child and Dependent Care Credit
- Electric Car Credit
3. Itemize deductions
We hope you’ve kept your receipts! If you don’t want to go with the standard deduction, you can choose to itemize your deductions. Itemized deductions are expenses you’ve paid for throughout the year.
If the total amount of these expenses is greater than your standard deduction amount, and you have the receipts and records for them, you should itemize instead of taking the standard deduction. Here are the most common itemized deductions:
- Home mortgage interest
- Property, state, and local income taxes
- Investment interest expense
- Medical expenses
- Charitable contributions
- Casualty and theft losses
- If they’re the result of federally declared disasters
4. Use above-the-line deductions if able
Above-the-line tax deductions reduce your adjusted gross income (AGI). These items can be deducted in addition to itemized deductions if you are eligible for them or can be deducted even if you don’t itemize. Some of these deductions are:
- Student loan interest
- Tuition and fees
- Educator expenses
- Self-employment tax
- Contributions to an IRA
- Health insurance premiums
5. Claim stimulus checks
Did you miss out on the stimulus checks this year, didn’t receive any or all of the money you qualified for? You can get that money in your tax return as long as you are filing as an independent.
When you file your taxes, you can claim your full stimulus check amount as a Recovery Rebate Credit. You won’t get a separate stimulus check, but this money will be added to your tax refund or deducted from the amount you owe (if any).
Remember this year to file smarter, not harder! For more tax help, read our blog on Tax Benefits of Owning a Home. Happy tax season!
*The information provided by Voyage FCU is informational only. Please consult with a tax professional regarding your personal or business taxes.