If you're hoping for a fat tax refund check next year, you have to play your cards right. Since some deductions will get you a bigger tax refund than others, it helps to know which deductions can save you the most money on your tax bill. Qualifying for certain tax credits can also get you a bigger tax break.
Increase the amount of money withheld from your paycheck. If you claim fewer withholding allowances when you fill out your Form W-4 -- the Employee's Withholding Allowance Certificate -- your employer will withhold more money for federal taxes. This can translate into a larger tax refund.
Contribute more to your 401(k) plan or traditional IRA. Making tax-deductible contributions to a qualified retirement plan can get you more of a tax refund when you file your return. You'll reduce the amount of your taxable income, which means you could land in a lower tax bracket. Depending on your income level and filing status, the contributions you make to a traditional IRA might be fully deductible. Married couples filing jointly get the greatest tax benefit here.
Claim the Earned Income Tax Credit. Taking the credit reduces the amount of tax you owe, which could give you a refund. To qualify for the credit, you must have earned income and a qualifying child. If you get a credit that's more than the tax you owe, Uncle Sam refunds the difference to you. Even if you don’t owe any tax, you must file a tax return to claim the credit and get your refund.
Add up the costs you pay for care for your dependent children or parents. You can deduct the Child and Dependent Care Credit directly off the amount of tax you owe. To qualify, you must work and pay childcare expenses for a child younger than age 13. You can also qualify for the credit if you pay dependent care expenses for an older disabled family member or spouse so that you can work.
Take deductions from all of your charitable contributions during the year. For example, if you tithe a fixed percentage of your income to your church, you can wind up with a substantial charitable deduction by the end of the tax year. You can also estimate the value of non-cash charitable contributions you make. The IRS lets you take a deduction for clothing and household items you donate as you get a receipt. To get the deduction, the items must be in good condition. You also must itemize deductions on your tax return. If you're in a higher tax bracket, you’ll be able to take more money off your taxes for any charitable contributions you make.
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