We all have to pay taxes. And while filing your tax return may not be your favorite thing to do, for many, there’s a silver lining: tax refunds.
Most people have their taxes withheld automatically from their paychecks. But if you’re self-employed, you should pay estimated taxes throughout the year. Either way, if you paid more in tax than you actually owe throughout 2023, you could get a refund when you file your tax return. On the flip side, if you owe more than you paid, you’ll face a tax bill.
There are differing opinions on whether you should aim to get a tax refund. If you overpay throughout the year, you’re essentially loaning money to the government interest-free for months. But you might not mind doing this if you know it will mean a refund in April.
Whether you’re looking to boost your tax refund or lower your tax liability, here’s what you need to know about how annual tax changes affect your taxes and tips to make sure you don’t overpay.
How tax changes impact your refund
While your financial situation may remain fairly constant from year to year, tax law changes can impact the size of your refund, including increases to income tax brackets and the standard deduction.
Many taxpayers don’t know that inflation impacts everything — including tax bracket adjustments to tax rates applied by the IRS, said Lanesha Mohip, MBA, CEO of Polished CFO Solutions and a member of CNET Money’s Expert Review Board. Inflation also affects state tax rate changes which play a role in determining how much money you get back during tax time.
But that’s not the only tax change that could impact your refund. Other tax law changes include changes to the child tax credit (including advanced payments) and the elimination of the personal exemption.
To understand how tax changes impact your refund, check the IRS official website for the latest updates or work with a tax professional. Certain tax changes could work in your favor and yield a bigger refund.
How to boost your tax refund (or lower your tax bill)
1. Work with a tax professional
“It’s very easy to miss refundable credit or deduction opportunities,” Mohip warns. And if you don’t claim a tax break you’re eligible for, you could find yourself with a smaller refund. Therefore, she recommends working with a professional — especially if you want to maximize your refund.
Working with a tax pro can also help you avoid costly errors, according to Andrew Griffith, a certified public accountant and CNET Money expert review board member. Griffith cited two different IRS reports detailing a high number of tax returns received by the IRS that have errors. He suggests working on your return with a licensed attorney, CPA or enrolled agent to reduce the likelihood of an error.
2. Claim all eligible tax credits and deductions
If you’re not claiming all of the tax deductions and credits that you qualify for, you may be leaving money on the table. Even if you won’t end up with a refund, maximizing your tax breaks can help lower your tax liability. Make sure you double-check that you’re claiming all eligible tax credits and deductions. Online tax software can help you do this, but if you have questions, you may consider working with a tax professional, especially if you have a complicated tax situation. But don’t wait until tax time to see if you qualify.
“Start planning or leveraging the tax code at the top of a new tax year — not at the end of a tax year,” said Mohip. Waiting means that at the end of a calendar year, you may realize that you could’ve qualified for deductions or credits, like making charitable donations or contributing more to your retirement.
3. Don’t overlook deductible expenses
The IRS allows certain expenses to be deducted from your total income. These tax deductions include business, medical or educational expenses in some cases. Any deductible expenses you have can be subtracted from your total income, lowering your tax bill and increasing your refund.
If you have tax-deductible expenses, Griffith recommends keeping any related documents as proof — such as receipts, bank statements, W-2s and 1099s. It’s best to hold on to documents for at least 10 years after you file your taxes in case you’re audited.
4. Choose the right filing status
Your filing status plays a big part in the size of your refund — regardless of your income. Which status you choose will determine which tax credits you qualify for, your standard deduction amount and how much you owe in taxes, according to the IRS.
Sometimes your filing status can heavily impact your refund. For example, if you qualify to file as single or head of household, filing as head of household could help you claim more in deductions and tax credits. If you’re married you have two options — file joint or separately. Filing married but separately means you’ll miss out on certain deductions like the Earned Income Tax Credit. But you may earn a bigger refund (or face a larger tax liability) if you file jointly.
If you’re unsure which status is best or you qualify for multiple, you can use the IRS’s interactive tax filing status tool to help you figure out how to proceed. When in doubt, experts recommend talking to a tax professional. Sometimes the filing status you choose can heavily impact your refund. For example, if you’re single and head of household, you may choose head of household for more deductions and tax credits.
5. Maximize your contributions
Meeting the threshold for your retirement contributions (like your 401(k) or Roth IRA) can also help you qualify for the Saver’s tax credit, which can help you get 10%, 20% or 50% back — depending on your adjusted gross income. Keep in mind there are deduction limits and you may have a higher contribution limit, depending on your age. But depending on your tax bracket, adding to your retirement fund could help increase how much money you get back.
It’s best to work toward maximizing your contributions year-round so you’re not rushing during tax time. However, you have until April 15 to make IRA contributions that can count toward your 2023 tax return to help you boost your refund.
6. Adjust your W-4
If you usually find yourself with a tax bill or a smaller refund than expected, you can make changes to prevent this from happening next year. If you work for an employer that withholds taxes from your paycheck, you can adjust tax form W-4 to pull more taxes from your paycheck throughout the year.
You can do this by changing your exemptions on your W-4 or by updating line 4(c) of your W-4, “extra withholding.” You can enter an additional amount that should be held from each paycheck so come tax time, you’ll have a bigger refund.
7. File at the right time
Be mindful of when you file your taxes. It’s best to wait until you have all of your tax documents handy to avoid filing an amended tax return. But it’s also wise not to wait until the last minute and have the stress of getting your return filed before the deadline.
But if you’re waiting to see if Congress expands the child tax credit this year, the IRS has encouraged those eligible for the expanded CTC to file now. If the enhanced credit is passed, you’ll still be able to receive any additional money you’re owed.
