In 2019, the average tax refund was $2,725. Nearly 96 million tax filers got money back from the IRS out of the approximately 150 million filings. While many of those who got a refund may have received every possible penny back, others likely left money on the table. If you want to make sure you maximize your IRS refund, here are some tips every couple should follow.
Explore Itemizing
While itemizing your deductions may seem tedious and unnecessary, especially after the standard deductions got a boost from the Tax Cuts and Jobs Act (TCJA) of 2017, it’s actually a good idea to give it a whirl.
There are a lot of costs that may qualify, including charitable donations, medical and dental expenses, and more. It’s smart to examine every one that could be itemized and do the calculations. By going through the itemizing process, you can find out if that approach is better for you financially.
Just make sure that you have any required documentation to back up the deduction. That way, if you get audited, you have some proof available.
Choose the Best Filing Status
If you’re a married couple, don’t default to “Married Filing Jointly.” In some cases, filing separately is actually a better financial move. For example, it might reduce the adjusted gross income for both of you, creating a bigger refund. As with itemizing, it’s best to run the numbers both ways so that you can choose the optimal route.
For single people who are part of a couple, don’t default to “Single.” Check to see if one or both of you, depending on your living situations, qualify as “Head of Household.” If you do, the tax savings can be significant, so it’s worth checking.
It is important to note that the rules to qualify as Head of Household are very strict. Don’t be tempted to stretch the truth or assume that you’re eligible, as the penalty for choosing the wrong status can be somewhat severe.
Check Your Tax Credit Eligibility
Many tax filers overlook credits that they could use to lower their tax burden. For example, approximately 20 percent of those who qualify for the Earned Income Tax Credit don’t claim it. While usually it applies to households with children, there are single and married filers without kids who might qualify.
Another often missed credit is the Child and Dependent Care Credit. With this one, if you have a daycare or similar expense for a dependent, you could be eligible for some tax savings. Similarly, graduate students may qualify for the Lifelong Learner credit, an often-overlooked educational credit.
There is a slew of other credits that many households miss. As a result, it’s always wise to look at each one. Then, you can determine whether it applies to your situation.
Do you have any more tips that can help couples maximize their IRS refund? Share your thoughts in the comments below.
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