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Tax season which means you'll be seeing a lot of commercials about getting the biggest tax refunds.
While taxes can be complicated, the method of getting a larger tax refund is fairly straightforward.
If you want to maximize your refund, then you need to make sure you're claiming all the deductions and the credits you're entitled to.
The more you're aware of what's available, the better prepared you are when it's time to file your taxes.
What's the Difference Between Tax Deductions and Credits?
While the two can help you greatly, there is an important difference between tax deductions and credits.
Tax deductions and exemptions reduce your taxable income while tax credits lower your tax bill.
Another note is that some tax credits are refundable, which as you may have guessed, could mean a refund if the total id great that what you owe.
I'll give a really simple overview to clarify.
Let's say you and your spouse have a taxable income of $75,000. You two are smart and claim about $10,000 in deductions. Not only have you reduce your taxable income, you've managed to keep your self from a higher tax bracket.
You see that your tax bill for the year is $2,500. You claim your credits (some of them refundable) and it comes out to $3,500.
Looks like you're getting a $1,000. Boom.
Bigger Tax Refund? Know Your Credits and Deductions
Before you file your taxes, it pays to be familiar with some of the most popular deductions and credits.
Tax Deductions & Exemptions
- Dependent Exemption
- Mortgage Interest Deduction
- Student Loan Interest
- Charitable Contributions
- Medical Expenses
- Home Office Expenses
- Earned Income Tax Credit
- Child and Dependent Care Credit
- Child Care Credit
- Saver's Credit
If you want to find out more details, please feel free to check out some of my contributing posts over at TurboTax.
I love sharing tips on how families can save on their taxes.
We've been using TurboTax for years and love how easy it is to get our taxes done. You can check them out and see which edition of TurboTax is right for you.
Even if you want to do it yourself, TurboTax has some really handy (and free!) tools you can use like TaxCaster.
Thoughts on Tax Credits and Deductions
I'd to get your take on taxes. Are you expecting a refund? What deductions or credit are you making us of? What are your plans for your tax refund?