Whether you utilize the standard deduction or itemize, tax credits reduce the amount of taxes you owe in a direct manner.
Expected tax law changes in 2023 would likely result in reduced tax refunds this year. Recent IRS statistics indicate that the average refund this year is $3,079, which is 11% less than the average refund last year of $3,473.
This Year’s Average Tax Refund
One of the most effective strategies to buck the trend of declining tax refunds is by claiming all available tax credits. Although the child tax credit is less than it was in 2022, it is still a significant $2,000 for each child under the age of 17 in 2022.
Understand how tax credits operate and which ones you may be eligible to claim in 2023 in order to receive a larger tax refund. Here’s the Average Tax Refund Received So Far in 2023:
The IRS said that approximately 46 million Individuals had submitted their taxes as of Feb. 24, 2023. Compared to last year, that’s up. Nonetheless, average refunds are lower.
Thus far, refunds average $3,079. The average taxpayer received $3,473 from the government last year, down over 11%.
Only time will tell if tax refunds will rise in the coming weeks. But, there are ways to maximize your tax refund.
How To Maximize Tax Refunds
Here are some strategies for maximizing your tax refund and boosting your savings.
Choose The Right Filing Status
The status for filing taxes is simple for adults without dependents. That is more difficult for some. Couples may file jointly or individually. Jointly is optimal, although sometimes separating is more effective. Your tax preparer or accountant should ask you questions to determine your optimal filing status.
Head of household is the ideal designation for singles with dependents. This filing status allows you to earn more before reaching the next tax rate compared to the single filing.
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Claim All Tax Breaks You Qualified For
Credits and deductions are tax breaks. Deductions reduce your taxable income each year. If you qualified for a $1,000 tax deduction and made $50,000, the government would only tax $49,000 of your income.
Credits decrease taxes. If you qualified for a $1,000 tax credit and your annual tax liability was $10,000, you would owe $9,000. Higher tax exemptions and credits result in a larger tax refund. You could qualify for tax deductions and credits for things like:
- Having a child in 2022
- Paying for expensive medical bills or educational costs
- Contributions to tax-deferred retirement plans, such as a 401(k), are encouraged (k)
- Contributing to charity causes
- Contributing to a health savings account (HSA)
If you follow the above instructions, you can rest assured that you will receive the maximum return. But, it is more vital to ensure that your taxes are filed correctly. You don’t want to spend more time than necessary dealing with the IRS, so take your time and seek assistance if necessary.
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