How to Maximize Tax Refund: with Don’t Miss Deductions and Credits
Tax season is here, and if you’re like most taxpayers, you’re looking for ways to maximize your refund. The good news? There are plenty of deductions and credits that can put more money back in your pocket—but many filers overlook them. In this guide, we’ll break down some of the most commonly missed tax deductions and credits, helping you get the most from your tax return.
Understanding Tax Deductions vs. Tax Credits for your Tax Refund
Before diving into the specifics, it’s essential to understand the difference between tax deductions and tax credits:
- Tax Deductions reduce your taxable income, which lowers the amount of income subject to taxation.
- Tax Credits directly reduce the amount of tax you owe, dollar for dollar, making them more valuable in many cases.
Now, let’s explore the deductions and credits you should consider when filing your tax return.
Commonly Overlooked Tax Deductions for Your Tax Refund
If you itemize your return you may be able to deduct the following expenses.
1. Medical and Dental Expenses
Did you have high medical costs last year? If your medical expenses exceed 7.5% of your adjusted gross income (AGI), you may be able to deduct them. This includes:
- Doctor visits
- Prescription medications
- Dental treatments
- Health insurance premiums (if paid out-of-pocket)
3. Student Loan Interest Deduction
If you made payments on a student loan, you might be eligible to deduct up to $2,500 in interest—even if you don’t itemize deductions. This deduction can provide significant savings, especially for recent graduates.
4. Self-Employment Expenses
Freelancers, gig workers, and small business owners can deduct various business expenses, including:
- Home office expenses (if used exclusively for work)
- Business-related travel and meals
- Internet and phone costs
- Health insurance premiums
5. Charitable Contributions
Donations to qualified charitable organizations are tax-deductible. Even if you take the standard deduction, you can still deduct up to $300 ($600 for married filers) in cash donations for 2024 returns. These deductions may not exceed 60% of your total adjusted gross income.
Tax Credits That Can Boost Your Tax Refund
1. Earned Income Tax Credit (EITC)
One of the most valuable credits for low- to moderate-income earners, the EITC can provide up to $7,430 for those who qualify. Eligibility depends on your income, filing status, and number of dependents.
2. Child Tax Credit (CTC)
Families with children under 17 can claim up to $2,000 per qualifying child, with a portion being refundable. This credit helps parents offset the costs of raising children.
3. Child and Dependent Care Credit
If you paid for childcare while working or looking for work, you may be eligible for a credit worth up to $3,000 for one child or $6,000 for two or more children.
4. American Opportunity Tax Credit (AOTC)
Students and parents paying for higher education expenses can claim up to $2,500 per eligible student. Unlike deductions, this credit provides a direct reduction in taxes owed, with up to $1,000 refundable.
5. Saver’s Credit
Contributing to a retirement account like a 401(k) or IRA? You could qualify for the Saver’s Credit, which provides a tax break for low- to moderate-income individuals saving for retirement.
How to Ensure You Maximize Your Tax Refund
Maintain receipts and records for medical expenses, charitable donations, and business costs to substantiate your deductions.
2. Use Tax Software or a Professional
Tax preparation software can help identify deductions and credits you might otherwise miss. Better yet, working with a tax professional ensures you’re claiming every possible tax break.
3. Adjust Your Withholdings
If you consistently owe taxes or receive a large refund, consider adjusting your W-4 to better match your tax liability.
4. File Early
Filing early helps you avoid tax-related identity theft and ensures you receive your refund sooner.
Maximizing your tax refund is all about knowing which deductions and credits apply to your situation. Don’t leave money on the table—review your finances, gather your documents, and consider professional tax help to ensure you get the largest refund possible. Need assistance with your tax return? Contact Cowdery Tax and Business Solutions today to make tax season stress-free and profitable!
This information is not intended as legal or tax advice. Cowdery Tax and its representatives does not offer legal or tax advice. We offer services for business bookkeeping, payroll, tax payments, and personal tax filings. We share information that is publicly available. Tax laws may change with or without notice that may alter or change the information contained in this publication.
