March 6th 2024.
As tax season kicks into high gear, the thought of receiving a tax refund becomes a glimmer of hope for many individuals, according to a recent report by ABC News. However, the way we handle our taxes can have a significant impact on the amount we receive back, leading financial experts to share their top tips for optimizing returns.
One of the most crucial decisions that taxpayers face is whether to take the standard deduction or itemize their deductions. The standard deduction, which is currently set at $14,600 for single filers and $29,200 for married filers, provides a simple reduction in taxable income. On the other hand, itemized deductions, which include expenses like charitable donations, gambling losses, and mortgage interest, may be a better option for some individuals, as they can often exceed the standard deduction. Dan White, founder of financial advisory firm Daniel A. White & Associates, advises that while the standard deduction is usually the way to go due to changes made in the 2017 tax overhaul, those who choose to itemize should consolidate their eligible expenses within one calendar year to maximize their deduction.
Aside from deductions, taxpayers can also increase their refund through tax credits. Gregory King, a certified public accountant and tax specialist at Empower, stresses the importance of considering tax credits, which are often overlooked. "People tend to focus on itemizing their deductions, but they forget about tax credits, which can make a significant difference," explains King in an interview with ABC News. For example, the tax credit for electric vehicles can provide up to $7,500 for eligible vehicles, while the home energy efficiency tax credit offers a 30% refund on renovation costs. Additionally, the child tax credit, currently at $2,000 per child, may be expanded to $3,600 if new legislative measures are passed.
Another tried and true method for saving on taxes is contributing to a retirement account. By putting money into accounts such as 401ks and traditional IRAs, taxpayers not only decrease their taxable income, but they also secure a financial safety net for their future. James Cox, a financial advisor at Harris Financial Group, encourages individuals to take advantage of this opportunity before the tax filing deadline of April 15.
While it may be too late to impact this year's tax season, making tax-deductible donations can be a smart strategy for future returns. Experts suggest planning these contributions strategically to align with personal financial goals.
As taxpayers navigate the complexities of deductions and credits, these insights from financial experts can serve as a helpful guide towards maximizing their tax refund and providing a welcome financial boost during tax season. And for those lucky enough to receive an unexpected windfall, check out our related content on how to budget for these unexpected bonuses.
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