With tax season being so stressful, you want to see a refund when you’re done filing. Prior to filing, you may be looking for ways to lower your tax liability or increase your refund for the 2022 tax year. Keep reading to learn 5 ways to maximize your tax refund this season.
1. Maximize Your IRA
While most contribution deadlines are at the end of the year, traditional IRAs allow you to contribute before the tax deadline and have those contributions recognized for the previous tax year.
Traditional IRA contributions reduce your overall taxable income, allowing you to potentially drop a tax bracket if you are close to the threshold. The contribution limit for 2022 is $6,000 with a $1,000 catch-up contribution for people aged 50 and up.
2. Maximize Your HSA
Along with traditional IRAs, you can contribute to your HSA until April 18th too.
People who have a high deductible health insurance plan have the option to utilize a Health Savings Account (HSA). Contributions to HSAs are pre-tax so they can also reduce your taxable income. For 2022, the contribution limit for a family health insurance plan is $7,300, and $3,650 for individual health insurance plans. There is an additional $1,000 catch-up contribution for those aged 55 and older.
3. Think About Your Filing Status
When filing your taxes, there are five different filing options that you can qualify for. The main one that you have an actual option to choose from is married filing jointly or married filing separately.
A majority of married couples file jointly but you may opt to file separately if you or your spouse has a high amount of medical or business expenses to reduce your adjusted gross income and increase your deductions. However, there may be tax credits that you may miss out on by filing separately.
4. Know Your Tax Credit
There may be tax credit opportunities that you are missing out on. It is important to note that most tax credits will only lower your bill if you owe, not surplus into giving you a refund like tax deductions. The most common tax deductions are:
- Earned Income Tax Credit: This credit is meant to assist low- and middle-income working families with children. Qualified tax filers with 3 or more qualifying children can earn up to $6,935 in 2022.
- Child Tax Credit: This credit allows tax filers with 1 or more dependents age 17 or younger to get a credit of $2,000 per dependent as long as they have an adjusted gross income of less than $200,000 for single filers and $400,000 for joint filers.
- Child and Dependent Care Credit: This credit gives the opportunity to offset some of the costs associated with childcare for children under 12 years old or care for a dependent with disabilities. In 2022, you can claim 20% to 35% of your childcare expenses with a maximum of $3,000 for 1 dependent or $6,000 for 2 or more dependents.
5. Itemize When You Can
Back in 2017, the Tax Cuts and Jobs Act was passed which increased the standard deductions to the point where many people cannot itemize their deductions anymore. However, if you have a large number of deductible expenses, it’s worth taking the time to itemize to increase your tax return.
Having an experienced and knowledgeable financial advisor on your side can make tax planning throughout the year more manageable. Contact me for help in building financial goals for the year and ways to assist you in achieving those goals. Email me at firstname.lastname@example.org or call me at 402-454-7204 to schedule your consultation.