When determining the tax money you'll get back after filing your taxes, consider the amount of money deducted from your pay based on the exemptions, or withholding allowances, you chose when filling out your W-4 form. Your income, and any tax credits or deductions for which you qualify, also play a big part in determining how much money you'll get back from the amount of tax that was withheld from your paycheck.
Each time you start a new job, your employer asks you to complete an IRS W-4 form to calculate how much in taxes to withhold from your paycheck. If you claim a high number of allowances because you want more spending money each pay period, you might end up owing on your tax return because your employer won't withhold enough taxes to cover your tax liability.
Conversely, if you don't claim enough allowances, you're probably going to get a refund because you overpaid your taxes. In the best case, you have just enough withholding allowances so that you neither owe money to the IRS nor get a refund. Work with an accountant or ask your employer's payroll personnel to help you calculate the right number of withholding exemptions to get your withholding taxes as close to your tax liability as possible.
Taking Tax Credits
The income you end up declaring on your tax return also, of course, affects the amount of taxes you get back. You can reduce your Adjusted Gross Income in several ways to reduce the amount of taxes owed, helping you get back more of the money that was withheld from your pay. Take advantage of various tax credits to reduce your taxable income. For example, you can take a tax credit for educational expenses related to improving your job skills, or the Earned Income Tax Credit if you fall under certain income limits. You can also take credits if you've adopted a child, paid mortgage interest or paid for child or dependent care.
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The Importance of Deductions
You can further reduce the amount of income on which you pay taxes by taking various tax deductions. The main deduction, the standard deduction, is one that everyone can take. The standard deduction amount varies based on your filing status, and ranges from $6,350 for single filers in tax year 2017 to $12,700 for married couples filing jointly.
You can itemize each of your tax deductions, but it won't be worth your while unless you come up with at least enough deductions to surpass the applicable standard deduction. This includes medical expenses, but these must exceed 7.5 percent of your adjusted gross income for you to deduct them. Other deductions include taxes paid on property, interest paid on your mortgage, student loan interest and contributions made to a health savings account or an individual retirement arrangement, among others.
Your Tax Liability
After factoring in all of the applicable tax credits and deductions against the income you've earned, you'll know how much tax you will owe, which you'll find in the tax tables of the instruction book for IRS Form 1040 or 1040A. You'll also enter the amount of tax you've already paid as shown on your W-2 form, and then calculate the difference. If the amount withheld exceeds your tax liability, the IRS owes you a refund. If the amount withheld from your pay as shown on your W-2 does not quite cover your tax liability, you'll have to write the IRS a check for the difference.