March 6, 2024
As tax season unfolds, the prospect of a tax refund becomes a beacon of financial reward for many individuals.
As tax season unfolds, the prospect of a tax refund becomes a beacon of financial reward for many individuals, according to ABC News. The approach taken during the filing process can significantly impact the size of the refund, with financial experts highlighting key strategies to optimize returns.
One crucial decision for tax filers is choosing between standard deductions and itemized deductions. The standard deduction, set at $14,600 for single filers and $29,200 for married filers this year, provides a straightforward reduction in taxable income.
However, itemized deductions, which include expenses like charitable donations, gambling losses, and mortgage interest, can surpass the standard deduction for some individuals. Dan White, founder of financial advisory firm Daniel A. White & Associates, notes that while the standard deduction is preferable for most filers due to its expansion under the 2017 tax overhaul, those opting for itemized deductions should consolidate eligible expenses in a single calendar year to maximize the deduction.
In addition to deductions, tax credits offer another avenue for increasing refunds. Gregory King, a certified public accountant and tax specialist with financial advisory firm Empower, emphasizes the often-overlooked importance of tax credits. “Everyone typically thinks of itemizing their deductions to increase the return, but many people forget to check tax credits, which can make a big difference,” said King to ABC News.
For instance, the electric vehicle tax credit, providing up to $7,500 for eligible vehicles, and the home energy efficiency tax credit, offering a 30% refund on renovation costs, can significantly impact returns. The child tax credit, currently at $2,000 per child, may also see an expansion to $3,600 if recent legislative measures pass.
Contributing to a retirement account emerges as a reliable method for tax savings. Contributions to accounts such as 401(k)s and traditional IRAs are tax-deductible, offering a double benefit of reducing taxable income and securing a financial nest egg for the future. Financial adviser James Cox of Harris Financial Group encourages individuals to take advantage of this opportunity before the tax filing deadline on April 15.
Lastly, while it’s too late to impact the current tax season, making tax-deductible donations can be a consistent strategy for future returns. Experts advise planning such contributions strategically to align with financial goals.
As tax filers navigate the complexities of deductions and credits, these insights from financial experts can guide them toward a more substantial tax refund, providing a welcome financial boost during tax season.
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