Smart taxpayers don't just file returns—they maximize them. As the tax year comes to an end, understanding the right strategies and timing can mean the difference between a modest refund and getting back every dollar you're legally entitled to. Here's how to make sure you're not leaving money on the table.
Understanding the End of the Tax Year
Before diving into specific strategies, it’s important to understand that tax laws and related amounts (such as deduction limits and credit thresholds) are reviewed and adjusted frequently. These adjustments are typically announced by the IRS in the fall before the tax filing season and can affect how much you ultimately owe or can deduct, so planning ahead is important.
Standard Deductions
- Single Filers (Unmarried or Married Filing Separately): The IRS sets a standard deduction for those filing on their own, whether unmarried or married filing separately.
- Joint Filers (Married Couples Filing Together): Married couples filing jointly have a different standard deduction amount.
- Head of Household: If you qualify as a head of household (unmarried and providing for a dependent) the IRS provides a separate standard deduction.
Strategy Spotlight: While standard deductions are generous, don’t assume they’re always the best option for your situation. Reviewing your personal circumstances and planning ahead can help maximize your tax benefits.
Itemized Deductions: When They Make Sense
Let’s explore when itemizing might put more money back in your pocket. If your qualifying expenses exceed your standard deduction, itemizing could lower your tax bill.
Key deductions to track include:
- Mortgage interest: Track all payments on your primary and secondary homes.
- Student loan interest: Up to $2,500 annual, subject to income limits.
- Charitable contributions/charitable donations: Both monetary and non-cash donations count.
- Medical expenses: Those exceeding 7.5% of your Adjusted gross income (AGI)
Strategy Spotlight: Keep detailed records throughout the year. Digital receipt tracking apps can simplify this process and ensure you don’t miss potential deductions.
Tax Credits to Consider
Unlike deductions, credits are particularly valuable because they can help to reduce your tax liability on a dollar-for-dollar basis. Here are key credits to consider:
- Child Tax Credit is a credit for parents or guardians of qualifying children. Part of this credit may be refundable, depending on current rules and your income
- Child and Dependent Care Credit helps offset work‑related care expenses for children and certain dependents so you can work or look for work.
- Earned Income Tax Credit (EITC) is a refundable credit for low‑ and moderate‑income workers. The amount depends on income, filing status, and number of qualifying children.
- Education credits such as the American Opportunity Credit and Lifetime Learning Credit can both help cover the costs of higher education.
Strategy Spotlight: Credits can be combined strategically. Work with a tax professional to ensure you’re maximizing all available credits for your situation.
