Ways to Boost Your Tax Refund
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AllSouth Federal Credit Union
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Tax time is here! Wouldn’t a big tax refund come in handy? Here are some steps you can take to boost your tax refund when you file this year.
Itemize your deductions.
The standard deduction is $12,550 for a single filer or $25,100 for those filing jointly (2021). It’s tempting to claim a standard deduction rather than tracking down receipts and tax forms so you can itemize your deductions. But itemizing might be worth it if you are a homeowner with a sizeable mortgage, gave money and “stuff” to charity, or paid points when you took out your mortgage. If you are an educator, you can deduct up to $250 of school supplies even if you don’t itemize deductions. Start gathering information right away so you’ll have everything ready when you file your taxes.
Claim education expenses.
If you're paying college expenses for yourself, your spouse, or a child, two education credits can help reduce those costs:
- The American Opportunity Tax Credit (AOTC) is a partly reimbursable credit for 100% of the first $2,000 of qualified education expenses you pay and 25% of the next $2,000. The AOTC is eliminated once your income exceeds $90,000 ($180,000 joint filers).
- The Lifetime Learning Credit (LLC) is 20% of the first $10,000 of education expenses. The LLC is eliminated once your income exceeds $69,000 ($138,000 joint filers).
Claim credit for your "full house."
The Child Tax Credit has been an important topic in 2021. If you received Child Tax Credit payments for 2021 you will need your Letter 6419 from the government for each individual, if you are filing jointly. The Letter 6419 helps taxpayers to reconcile and receive 2021 Child Tax Credits. If you did not receive any Child Tax Credits or only a portion of the Child Tax Credits for 2021, you may still be entitled to the credits on your taxes.
If your adult children, their significant others, and friends have come to live with you, you may be eligible to claim a $500 tax credit for non-child dependents you support if their income is less than $4,300. You can claim the credit for parents you support, even if they don’t live with you. Stick a note into your tax file (you do have a tax file, don’t you?) reminding you to look into claiming these credits.
Deduct worthless investments.
If you have an investment that went belly-up and sold it before the end of last year, you can claim a tax loss. If someone owes you money that you did not collect before the end of the year, you can claim that as a bad debt deduction as well. Write a description of the debt that includes the name of the debtor, the amount and the date the debt was due, and any relationship between you and the debtor. Describe the efforts you made to collect, and why you think the debt is now worthless.
File your tax return on time.
In 2021 the tax due date was extended causing some confusion, but in 2022 the IRS has announced that taxes will be due on April 18. The sooner you can complete your tax forms and submit, the sooner you can receive your tax return and avoid any tax penalties or extension paperwork. Even if you aren’t required to file a tax return because your income is low, file anyway to claim your refund for taxes withheld and any refundable credits you are entitled to. If you wait more than two years to file, the IRS will not issue you a refund.
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The information in this article is for general educational purposes only and not intended to provide specific advice or recommendations. Please discuss your particular circumstances with an appropriate professional before taking action.
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