If you’ve paid federal income tax during the year, chances are that you want as much of it back as possible. To get a bigger refund, make sure you evaluate your eligibility to claim every deduction, exemption and tax credit possible. Claiming these three items is the only way to reduce your tax bill and get a big refund check.
Claiming Tax Deductions
In general, there are three types of tax deductions you can claim on your tax return. The first are adjustments to your income, such as for tuition and fees you pay, alimony payments and contributions to a traditional IRA. These are available regardless of whether you claim the standard deduction or itemize. After reporting your adjustments to income, you must then choose between itemizing and claiming the standard deduction. The standard deduction for your filing status is fixed; however, if the total of all expenses you can itemize is greater than the standard deduction, then you will receive a larger refund by itemizing deductions. When evaluating your itemized deductions, there is a long list of expenses you can include, such as medical and dental expenses, charitable contributions, state and local taxes and job-related expenses.
Unless you are a dependent to another taxpayer, the IRS allows you to claim one personal exemption on your return. And if you have other dependents, you can claim an additional exemption for each of them. Generally, your dependents are individuals to whom you provide significant financial support to during the year, and in most cases, reside with you for more than half the tax year. However, there are different requirements you must consider depending on whether your dependent is a child or an adult. Each exemption reduces your taxable income just like a deduction. Therefore, the more exemptions you claim, the bigger your refund will be.
Federal tax credits reduce your tax bill on a dollar-for-dollar basis and typically increase your refund check more than a deduction of the same amount. Generally, each type of tax credit applies to specific situations for which you must qualify. For example, if you claim a dependent who is under the age of 17, then you may qualify for the child tax credit. This can potentially save you $1,000 in taxes, which means $1,000 more in your refund check. Other tax credits cover the tuition you pay for higher education, the purchase of certain solar energy systems or geothermal heat pumps and the expense of hiring someone to care for certain dependents.
Additional Tax Forms
Some of these credits, deductions and exemptions you claim may require you to fill out additional IRS forms. Although you can choose to file your tax return on Form 1040, 1040A or 1040EZ, only the Form 1040 allows you to claim dependent exemptions, all adjustments to income and itemized deductions. When you itemize your deductions, you must complete a Schedule A and attach it to your return. Most of the tax credits also require you to fill out a specific form to calculate the amount for which you are eligible. Although these additional forms may require more of your time, it’s well worth the larger tax refund.
Jeff Franco's professional writing career began in 2010. With expertise in federal taxation, law and accounting, he has published articles in various online publications. Franco holds a Master of Business Administration in accounting and a Master of Science in taxation from Fordham University. He also holds a Juris Doctor from Brooklyn Law School.