Everyone wants to maximize their tax refund; money is most likely to be tight. The pandemic put a whole new spin on the job market. Many jobs were eliminated because of safety concerns. Throughout it, people found new ways to navigate the job market, and many created their positions in the ever-changing market. With everything changing so dramatically, there are also new things you must look at on your taxes. Even, if you didn’t make a dramatic career shift, tax laws are fluid so you may overlook something that could increase your tax return this year. This is a list of 10 ways to get the most out of your tax refund in 2022.
10. Claiming Dependents
It’s best to make sure you itemize everyone you are supporting on your tax return. This year, the child tax credit as well dependent care credit are both larger. According to U.S. News, The American Rescue Plan increased the credit amount from $2000 to $3,000. Additionally, if the child is under 6 years old the amount is $3600.
9. Care Credits
Another thing to make sure to take a look at is the child and dependent care credits. Referring to the American Rescue Plan, the amount was substantially increased as well. Where it used to be $8,000 for one person, it’s $16000 for two or more qualifying dependents. Additionally, it applies to children under the age of 13 who have mental disabilities. You may be able to combine these credits with the economic impact payment which is $1400 for those who qualify.
8. Itemize Your Deductions
Although it may be tempting to go for the EZ file and be done. Utilizing the itemized deductions may be the best way to go to maximize the amount that is returned to you. In 2017, The Tax Cuts and Jobs Act almost doubled the size of the deduction for each year through 2025. Charitable contributions are certainly one thing to take a look at.
7. Charitable Deductions Without Itemizing
Even if you don’t use the itemized deductions, you can still deduct charitable contributions. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 made this possible. So, individuals who have a standard deduction can also add a limited deduction of $300 for a cash donation made to certain charities. Married couples can double that amount when filing together.
6. Your Filing Status
This is the first and maybe the most important decision you will make on your taxes. According to Turbo Tax, 96% of married couples file together but it may not be the most prudent option. For example, if you choose to file separately, you may spend a little bit more time but you may do better if your significant other has higher medical expenses or has recently lost a job.
5. Child Tax Credit
The American Rescue Plan was a sweeping bill and included a substantial raise in this credit, $3000 to $3600 depending on the child. The amount is also available up to the age of 17. Some families may have already begun to receive these payments as early as July. Some adjustments have been made to this so it’s best to check this site for the most up to date information.
4. Find All The Deductions
When you’re looking at last year’s tax forms, it may be easy to overlook some of the lesser-known deductions and one of them is State sales tax. You can look up your state’s tax rate for more information. Additionally, looking at reinvested dividends would be another prudent step. Although it’s not necessarily a tax deduction it can alter your overall tax liability.
3. IRA and HSA Contributions
Any donations you make until you file can be counted in your 2022 tax return. Some of these include traditional IRA contributions which reduce your taxable income. This is one you can take advantage of if you are over the age of 50. Another you can do if you’re self-employed is contribute to a retirement plan which caters to workers like you. You will want to check the dates if you filed for an extension. The HAS or Heath Savings account is certainly important as well. For that deduction, you will need to be in one with a high deductible that meets the IRS guidelines.
2. When To File
We’ve heard the phrase timing is everything and that is certainly true with your tax return. For example, if you made your mortgage payment before December 31 last year it can be added. Another thing you’ll want to do is schedule your health appointments to fall in the last quarter so they can be added. Since this is the quarter that falls over Christmas, perhaps you’ll want to add some charitable contributions as well.
1. American Opportunity Tax Credit
This helps out college students and their families. Comparatively, this offers the greatest amount of deduction for families since it reduces the amount owed dollar by dollar instead of the overall amount. There are several caveats including the student must not have completed the first four years of post-secondary education. Additionally, this credit doesn’t necessarily only apply to traditional colleges and universities. It just needs to meet the requirements of the U.S. Department of Education. The American Opportunity Tax Credit can even be used for things like books and supplies.
The adage goes, every penny counts. Some of the amounts on the list may shift depending on if you received an advance payment. Additionally, families with newborns will want to make sure they take a second glance at their taxes. This year, additional new credits may be available. This is not an exhaustive list. However, I hope it put you on the path to finding some more money on your tax return.