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How to Maximize Your Tax Return For Bigger Refunds?
How to Maximize Your Tax Return For Bigger Refunds?
Filing taxes is a priority for every US taxpayer before the April deadline. That includes W-2 employees, self-employed individuals, independent contractors and freelancers. Unfortunately, when you're racing to organize your records and gather your documents to file your taxes, it's easy to forget about the ways to maximize tax refunds.
And whether you're a W-2 employee or a freelancer, there are a few things every taxpayer should know about refunds for taxes, how do tax returns work, how much tax can I get back and how to max tax refunds.
Table of contents
Key takeaways:...Read more
Maximizing refunds for taxes as a full-time W-2 employee...Read more
Carefully choose your deduction method...Read more
What is a filing status?...Read more
How to reduce taxes when self-employed?...Read more
Contributions to charities or retirement plans...Read more
Using tax credits as a refund maximizer...Read more
How do tax returns work?...Read more
How to get a bigger tax refund with no dependents?...Read more
How to get more money back on taxes?...Read more
What is the average tax refund by income?...Read more
What are some examples of refund maximizers?...Read more
Key takeaways:
- To maximize your tax refund, you can use tax credits, contribute to retirement accounts or make charity donations.
- Getting a refund from your tax return can change based on your filing status.
- The average tax refund by income varies based on your taxable income, deductions, credits and withholding.
Maximizing refunds for taxes as a full-time W-2 employee
The taxes that W-2 employees are required to pay are directly withheld from their monthly paychecks by their employers, who estimate – or more likely overestimate – what they will owe at the end of the year. That means full-time employees almost always overpay and end up receiving a refund.
Employees also fill out W-4 forms to give their employers information about their individual tax situation, so that their employer doesn't withhold more tax than necessary from their paychecks. The W-4 is a tax document where employees can claim tax credits they qualify for, such as:
More on credits like these later.
If you're filling out a W-4, you should also report any self-employment income outside of your full-time work. More tax will be withheld from your paycheck, but you won't need to worry about paying quarterly estimated taxes on that income yourself.
As a full-time employee, you can claim personal tax deductions like charitable contributions, medical expenses and student loan interest. Employees can also contribute to retirement accounts like traditional IRAs or a 401(k) plan. These contributions can help lower your tax liability further and act as a refund maximizer. Just make sure you make these contributions during the year and before the tax filing deadline.
When you file your tax return, make sure to carefully check all the deductions you claim, so that the return you file is error-free, and you're sure to get any tax overpayment refunded accurately. FlyFin’s AI simplifies and automates this part of the tax filing process, helping you track all your deductions and find every possible write-off.
Carefully choose your deduction method
There are two methods of taking tax deductions, the standard deduction method and itemizing your deductions. Any taxpayer will naturally want to choose the method that brings them the maximum deduction. The standard deduction is a fixed deduction amount that is uniform for every taxpayer, though it varies for different filing statuses. For single filers, it's $14,600 for the 2024 tax filing season, up by $750 compared to last year.
What is a filing status?
A filing status helps you clearly identify your tax rate. The IRS has created the following four filing status, and every tax filer must choose one based on their individual tax situation:
There are some limitations on what you can choose, for example, if you are married you can choose to file as a single filer, but the reverse is not true. When you are filing as a married couple, you get a higher standard deduction value, so the IRS wants you to benefit from this only if you are actually married.
For the 2024 tax season, the standard deduction for married couples filing jointly is up by $1,500 to $29,200. The same applies to the head of household, who will now be able to deduct $21,900 as a standard deduction from their taxable income, $1,100 more than in the last tax year.
Depending on individual tax situations and the amount of money you can save, you can choose different filing statuses when you have documents to support your status.
How to reduce taxes when self-employed?
If you run a small business, you can claim qualified business expenses as self-employment deductions from your taxable income. These expenses include a wide variety of purchases you make to keep your business running. The IRS says that these expenses should be "necessary and ordinary" for your type of business, meaning they need to be common purchases made to carry out your business and be necessary for your line of work.
If you're a freelance delivery driver, gas is a necessary expense. If you have your own landscaping company, tools qualify as a business deduction.
To write off your business expenses, you'll need to keep track of them and save your receipts for tax filing. Using a tax deduction calculator is an easy way to find write-offs you can claim.
For a doctor operating as a sole proprietor working out of a home clinic, business deductions can include diagnostic tools, chairs for the waiting area and home office deductions like utilities and internet expenses.
Contributions to charities or retirement plans
Like W-2 employees, self-employed individuals can also invest in retirement plans and government insurance programs. As a freelancer, independent contractor or self-employed individual, you can contribute to an SEP-IRA or a Solo 401(K) and mention this on your tax return to lower your taxable income. SEP stands for self-employed pension and is aimed at promoting retirement savings for self-employed individuals.
If you contribute to the SEP-IRA, which has a maximum annual contribution limit of $6,000, you can deduct it from your taxable income. If your tax return shows an overpayment, you’ll get it back as a refund.
Using tax credits as a refund maximizer
Once you know your adjusted gross income (AGI), you can check if you qualify for any tax credits. The IRS uses your AGI as an indicator to check if you are eligible for tax credits.
One of the most widely taken advantage of tax credits is the Earned Income Credit. To take advantage of it, you must:
- Have US citizenship
- Have a valid Social Security number
- File a tax return even if you don't owe taxes
- Be between 25 and 65 years old
- Not be claimed as a dependent on another person's tax return
This might seem like an overwhelming amount of information, but fortunately apps like FlyFin can simplify taxes for you. FlyFin has an expert team of CPAs to help you with every aspect of your tax filing that can help you max out your tax refund.
How do tax returns work?
When you file a tax return, you're reporting your income, tax payments, and claiming deductions or credits you qualify for. The IRS compares what you’ve already paid with what you owe, and if too much was withheld from your paychecks, you’ll get a refund from your tax return.
For example, imagine you worked a job where your employer withheld taxes, but you had significant deductions, like student loan interest or healthcare expenses. These deductions reduce your taxable income, meaning you’ve overpaid throughout the year. The IRS will issue you a refund for the overpayment.
To maximize your tax refund, claim every possible credit or deduction. A common example is the Earned Income Tax Credit, which provides a boost for low- to moderate-income workers.
Using tax software or consulting with a tax professional can also make sure nothing is missed. In the end, your refund is the difference between what was withheld from your income and what you actually owe. Many people receive refunds simply because their employers withhold more than needed.
How to get a bigger tax refund with no dependents?
If you don’t have dependents, you can still get a bigger tax refund by taking advantage of deductions and credits. For example, imagine you’re single, have no children, and earn $50,000 a year. One way to maximize your tax refund is to contribute to a retirement account like a 401(k) or an IRA. These contributions reduce your taxable income, so instead of being taxed on $50,000, maybe you’re taxed on $45,000, which can lead to a larger refund.
Let’s say you also made charitable donations during the year. By keeping track of these donations, you can claim them as deductions to reduce your taxable income further. Another common scenario is if you’re paying off student loans. You can deduct up to $2,500 in interest payments, which lowers the amount of income subject to tax. So, even without dependents, you can still see a decent refund for taxes by being mindful of your eligible deductions and credits.
How to get more money back on taxes?
To figure out how to get more back on taxes, it helps to understand the deductions and credits available to you. Let’s say for example, you are a middle-income earner who owns a home and contributes to a retirement account. By deducting your mortgage interest, you’re able to reduce your taxable income significantly.
Say your taxable income started at $70,000, but after contributing to your IRA and deducting mortgage interest, it drops to $60,000. This reduction lowers your tax bill and increases the amount of your refund. You also makes sure to claim all your eligible tax credits, like the Lifetime Learning Credit for taking continuing education classes. By using a refund maximizer tool, you ensure you’re getting refunds for taxes.
What is the average tax refund by income?
The average tax refund by income can vary a lot depending on your situation. In 2024, the overall average tax refund was about $2,850, but this varies based on factors like how much income you earned, the deductions and credits you claim, and how much tax was withheld. If you’ve had a lot withheld from your paycheck, you might get a larger refund from your tax return.
Conversely, if you didn’t withhold much, you might get a smaller refund or even owe money. Whether you’re on the lower or higher end of the income spectrum, how you manage your deductions, credits and withholding plays a big role in the size of your refund.
What are some examples of refund maximizers?
To increase your tax refund, focus on lowering your taxable income before the year ends. If you're self-employed, think about buying office supplies, equipment, or software before December 31 to take advantage of extra deductions.
Even small purchases can help. If you claim the home office deduction, you can also deduct costs like painting or upgrading your workspace. So, not only will you have a fresh office, but you'll also reduce your taxable income.
As a homeowner, making your January mortgage payment in December allows you to claim more interest for the mortgage interest deduction, which can boost your refund. You could also schedule any medical treatments or exams in the last quarter to maximize your medical expense deduction.
Don’t forget about making charitable donations—just make sure the charity is qualified, and keep all your receipts for your records. These small steps can help you increase your deductions and get a bigger refund when you file.
What’s FlyFin?
FlyFin caters to the tax needs of freelancers, gig workers, independent contractors and sole proprietors.
But anyone can file taxes through FlyFin! FlyFin tracks all your business expenses automatically using A.I. technology.
Then, our CPA team files a guaranteed 100% accurate tax return for you – to save you a couple thousand dollars and a ton of time on your taxes.
In addition, you can download the FlyFin app and have your taxes filed in less than fifteen minutes, saving time and money.
Expert tax CPAs ensure 100%-accurate tax filing
A.I. finds every tax deduction, eliminating 95% of your work
On average users save $3,700
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