By It’s getting to be that tax time of year! Filing taxes, like paying taxes, may not be an enjoyable to-do, but receiving a substantial refund at the end can certainly make the process feel more worth your time. Wondering how to guarantee you get more money back in your pocket for the 2024 tax year? We asked tax experts for hacks to maximize your refund, including credits and deductions that could be a good fit for your situation.
Tax credits vs. deductions
One of the easiest ways to maximize your refund come tax season is through credits and deductions. Though both are beneficial, there is a key difference between them.!
“A tax deduction is going to lower your taxable income before calculating what tax you owe; while a tax credit is going to lower what you owe, dollar for dollar or get you a bigger refund,” says Katharina Reekmans, enrolled agent and tax expert with TurboTax. “Some can even get a tax credit even if they don’t owe anything as some tax credits are refundable, which means that even if you have no tax liability you will receive a refund.”
Below are some overlooked credits and deductions that might apply to you and mean more money in your pocket.
Overlooked tax credits that could boost your refund
Lifetime Learning Credit
This credit means you can receive up to $2,000 as a dollar-for-dollar credit on expenses paid. Who can qualify for this: “Students at any level of post-secondary education (including graduate school, vocational programs, and part-time courses),” shares Emily Luk (CFA/CPA), CEO and co-founder of the money management platform Plenty. The key is that you must be enrolled at an eligible institution that participates in the student financial aid program from the U.S. Department of Education.
Tuition, fees and required course materials all qualify for this credit. It will also cover the cost of programs/courses that involve workforce development and continuing education.
Other Dependent Credit
Though most people know that parents of young children are eligible for a credit, caregivers for individuals with a disability (regardless of age) are too. “If you are caring for someone other than a child dependent, you can take advantage of this tax credit which equals $500 per non-child dependent that you support,” shares Reekmans.
Residential Energy Credit
Installing solar panels, energy-efficient windows, doors, insulation or energy-efficient HVAC systems in your home may mean you qualify for this credit, says Luk. This applies to both renters and homeowners who have a new or existing home anywhere in the U.S. (Landlords, however, cannot claim it if they don’t live on the property.).
Retirement Savings Contribution Credit
Often called the “Saver’s Credit,” this tax credit involves retirement savings contributions to traditional IRAs and 401(k)s. It allows people to claim a credit worth up to $1,000 ($2,000 for married couples filing jointly) as long as they’re eligible.
It depends on how much you have contributed and your adjusted gross income (AGI). As long as your AGI is below the following thresholds, you may be able to claim it:
- $76,500 for joint filers
- $57,375 for head of household filers
- $38.250 for anyone else filing
Smart tax deductions you may be missing
As mentioned above, tax deductions reduce the amount of income that’s taxable by the IRS. This means you can lower your total income tax bill and get a larger refund as a result.
According to H&R Block, there are two types of deductions: above-the-line and below-the-line. Above-the-line deductions are those that are subtracted from your gross income to calculate your AGI. Below-the-line deductions are known as itemized deductions and are deducted from your AGI to reduce your taxable income.
One tip when it comes to deductions? “There may be different deductions if you file separately vs. jointly so make sure you double-check which path maximizes deductions,” cautions Luk.
Here are some deductions that may be a fit for you:
Medical expenses
“They may be deductible if your expenses exceed 7.5% of your adjusted gross income in 2024 and only if you are able to itemize your tax deductions,” says Reekmans. “The cost of items, such as exercise equipment, or purchasing and maintaining a spa or swimming pool may be tax-deductible as medical expenses, but only if your doctor prescribed them to address a medical condition.”
Home office deduction
Anyone who is self-employed may be eligible for this deduction if they have a home office that meets IRS standards. “For example, if your home office represents 4% of your home’s total square footage, you may be eligible to deduct 4% off that property’s utilities, insurance, and property taxes,” the pros at H&R Block write. But there are strict rules for this to be a tax write-off!
HSA contributions
If you contribute to a Health Savings Account to save on health insurance costs, there’s good news: your after-tax HSA contributions are considered tax-deductible. One caveat? Contributions made by your employer may be excluded.
Charitable donations
Giving money to a non-profit can definitely count as a write-off, but this category is even more broad than you may think! “In addition to monetary donations, out-of-pocket costs related to volunteering, such as supplies and mileage (at 14 cents per mile), can also be deductible,” adds Reekmans. “It is not just large donations that count, keep track of smaller items like a cake donated for a charity’s bake sale.”
State taxes and local taxes
Known as the SALT deduction, this can help filers avoid double taxation. How it works: You can deduct up to $10,000 of property, sales or income taxes you have already paid to state and local governments. (Note: This SALT “cap” or limit will expire after 2025.) If you’re a resident in a state or city with high income and property taxes, this may be a beneficial option.
Other ways to maximize your tax refund
Knowing the credits and deductions you may be eligible for is one of the best ways to boost your refund potential. However, experts say there are other steps you can take throughout the year to maximize the money you get back when it’s time to file. Here are a few:
- Keep accurate and thorough financial records. “This can lead to overlooking eligible deductions or credits which could have increased your refund significantly,” says Reekmans. “It is crucial to maintain documentation of expenses, charitable contributions, and other relevant financial transactions to ensure you are taking full advantage of deductions and credits available to you.”
- Look into tax loss harvesting investments. “Each year, you get a one-time ‘gimme’ where you can harvest up to $3k and lower your income taxes,” advises Luk. This strategy allows you to offset taxable income by selling investments at a loss, potentially reducing the amount you owe.
- Contribute to retirement accounts. They can help reduce taxable income, says Reekmans, and increase the potential for a refund as a result.
- Bunch or delay deductible expenses when possible. “Strategically timing the payment of deductible expenses, such as medical bills or property taxes, to optimize deductions for the tax year [can help],” explains Reekmans.
