Plan Your Strategy: How to Get the Most Out of Your Tax Return
Filing taxes can often feel like a guessing game. However, when you’re aware of the deductions and claims available, you can make informed decisions when you file, and in turn, maximize your tax return. Here are some common things to keep in mind when you file:
Did you contribute to your retirement account in 2021? Then you may be eligible for what’s known as the saver’s credit! Individuals 18+ who are not students are eligible to receive a credit of up to $1,000 for making contributions to an IRA, employer-sponsored retirement plan, or ABLE account. How much you receive will be income-dependent, with tiered percentages for those making up to $66,000.
Students, this one is for you! If you’re paying college tuition as an independent student or the parent of a dependent student enrolled at least 50% of the time, you may be able to claim expenses including tuition, fees, and other related purchases (e.g.: books). Single individuals making $90,000 a year or married couples making $180,000 may be eligible for a $2,500 credit, with up to $1,000 being refundable.
Receiving stimulus payments may feel like a lifetime ago, but there were payments issued during 2021. If you qualified for a stimulus payment but never received it, you may be eligible to claim a recovery rebate on your 2021 taxes. Those with income of less than $160,000 for joint filers, $120,000 for heads of households, and $80,000 for other filing statuses are encouraged to go back into their records, and claim this credit if their 3rd stimulus payment wasn’t received. If you were eligible and didn’t receive one of the previous year’s payments, you can always amend your 2020 tax return.
Do you know the difference between a standard and itemized deduction? Many filers default to standard deductions to save themselves the headache, but you could be missing out on big bucks! The standard deduction - the amount you can deduct automatically, regardless of expenses - is $12,550 for single filers, $18,800 for head of households, and $25,100 for married couples filing jointly.
However, your combined expenses for charitable contributions, mortgage interest, state and local taxes up to $10,000 a year, and medical expenses that are greater than 7.5% of your income may add up to more than your relevant standard deduction. In this case, you’re encouraged to file a Schedule A to report these itemized deductions in place of your standard deduction.
If your adjusted gross income is less than $73,000, you don’t have to pay anything to file. Through IRS Free File, a partnership between the IRS and nonprofit organization Free File Alliance, free tax preparation software is available to anyone making less than that magic number. New York State has even patterned their Free File Program after the federal one, saving you money on both federal and state taxes! Visit http://www.irs.gov/freefile or the IRS2Go app to see how to file your taxes without the fee.
If you’re like most Americans, you’re learning more and more every year. That means that if you’re more informed on deductions and credits that apply to you now, you may have missed out on a larger return in past years. Fear not, the IRS allows you to amend your previous tax returns for up to three years. Keep this in mind while doing your 2021 taxes, and file Form 1040X to change any missed credits or deductions that you now know about. However, do your due diligence and make sure the mistake you’re claiming applied to your past tax statements at the time of original filing.
Now that you’re better prepared to file your taxes, make sure you consult with a financial advisor to see how you can use your extra cash to improve your financial future!
Pioneer and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.