Everyone wants to maximize their tax refund; money is most likely to be tight. The pandemic has given a whole new twist to the job market. Many jobs have been cut for security reasons. Throughout it, people have found new ways to navigate the job market, and many have created their position in an ever-changing marketplace. With everything changing so drastically, there are also new things you need to look at on your taxes. Even if you haven’t drastically changed careers, the tax laws are fluid, so you can overlook something that could increase your tax return this year. Here is a list of 10 ways to get the most out of your tax refund in 2022.
10. Ask for dependents
It’s best to make sure you detail all the people you support on your tax return. This year, the Child Tax Credit and the Dependent Credit are both larger. According to US News, The American Rescue Plan increased the credit amount from $2,000 to $3,000. In addition, if the child is under 6, the amount is $3,600.
9. Care credits
Another thing to check is child and dependent credits. Referring to the US bailout, the amount was also significantly increased. Where it was $8,000 for one person, it is $16,000 for two or more eligible dependents. In addition, it applies to children under 13 who have a mental disability. You may be able to combine these credits with the Economic Impact Payment which is $1,400 for those who qualify.
8. Itemize your deductions
Although it might be tempting to go get the EZ file and be done with it. Using itemized deductions may be the best way to maximize the amount returned to you. In 2017, the Tax Cuts and Jobs Act nearly doubled the amount of the deduction for each year through 2025. Charitable contributions are definitely something to look into.
Even if you don’t use itemized deductions, you can still deduct charitable contributions. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 made this possible. Thus, people 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 this amount when depositing together.
6. Your filing status
This is the first and perhaps the most important decision you will make regarding your taxes. According to Turbo Tax, 96% of married couples file together, but that may not be the most conservative option. For example, if you choose to file separately, you might spend a little more time, but you might do better if your loved one has higher medical bills or has recently lost their job.
5. Child tax credit
The US bailout was a sweeping bill and included a substantial increase in this credit, from $3,000 to $3,600 depending on the child. The amount is also available up to the age of 17. Some families may have already started receiving these payments as early as July. Some tweaks have been made to this, so it’s best to check this site for the most up-to-date information.
4. Find all deductions
When looking at last year’s tax forms, it can be easy to overlook some of the lesser known deductions and one of them is state sales tax. You can consult your state’s tax rate for more information. Also, looking at reinvested dividends would be another prudent step. Although not necessarily a tax deduction, it may change your overall tax liability.
3. IRA and HSA contributions
Any donations you make until you file can be counted on your 2022 tax return. Some of them include traditional IRA contributions that reduce your taxable income. This is the one you can enjoy if you are over 50. Another thing you can do if you are self-employed is to contribute to a pension plan that caters to workers like you. You will want to check the dates if you have applied for an extension. The HAS or Heath Savings account is certainly important too. For this deduction, you will need to be in one with a high deductible that meets IRS guidelines.
2. When to file
We’ve heard that timing is everything, and that’s certainly true for your tax return. For example, if you made your mortgage payment before December 31 of last year, it may be added. Another thing you’ll want to do is schedule your health appointments in the last trimester so they can be added. As this is the term that falls on Christmas, you may also want to add charitable contributions.
1. US Opportunity Tax Credit
This helps students and their families. Comparatively, this offers the largest deduction amount 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. Also, this credit does not necessarily only apply to traditional colleges and universities. It just has to meet the requirements of the US Department of Education. The American Opportunity Tax Credit can even be used for things like books and supplies.
Last words
The saying goes that every penny counts. Some of the amounts in the list may vary depending on whether or not you have received an advance payment. Also, families with newborns will want to make sure they take a second look at their taxes. This year, additional new credits may be available. This is not an exhaustive list. However, hopefully this will put you on the path to finding more money on your tax return.
