How To Maximize Your Tax Return

Itemizing only makes sense if your deductible expenses exceed the standard deduction. For example, if you’re a single filer and paid $20,000 in eligible expenses during tax year 2024, you would probably benefit from itemizing rather than taking a $14,600 standard deduction.

Some examples of itemized deductions available through 2025 due to the passage of the Tax Cuts and Job Act (TCJA) include state and local taxes (SALT) up to $10,000, charitable contributions, and out-of-pocket medical expenses over 7.5% of your adjusted gross income (AGI).

Above-the-Line Deductions

Also known as adjustments to income, above-the-line deductions are available whether you take the standard deduction or itemize. These deductions reduce both your taxable income and your AGI, which can help you maximize other deductions and tax credits.

Typically, the most significant above-the-line deductions come from contributions to tax-advantaged accounts, such as:

For example, employees could contribute up to $23,000 to their 401(k) for 2024. Taxpayers age 50 or older also qualify for $7,500 in catch-up contributions, resulting in a maximum contribution limit of $30,500 for the year.

If you were to earn $75,000 in 2024 and take the standard deduction as a single filer, you would owe about $8,341 in federal income taxes. However, if you claimed $25,000 in above-the-line deductions for retirement contributions, you’d reduce your taxable income to $50,000 and your federal income taxes to roughly $4,016.

Business Deductions 

If you’re self-employed, even through a part-time side hustle, you can deduct qualified business expenses from your business income. The IRS requires that these expenses be ordinary (common and accepted in your industry) and necessary (helpful and appropriate for your business).

As a result, allowable deductions vary by business type, but they often include:

• Home office expenses
• Business vehicle costs
• Marketing and advertising
• Office supplies and equipment
• Professional services, like legal or tax help

Take Advantage of Tax Credits

While deductions reduce your taxable income, tax credits reduce your actual tax bill. That means a $1,000 tax credit lowers your tax liability by $1,000. As a result, tax credits are generally more valuable than deductions.

There are two main types of tax credits:

• Nonrefundable credits can reduce your taxes to zero but won’t generate a tax refund even if they exceed the amount you owe.
• Refundable credits can reduce your tax liability below zero, resulting in a refund if the amount is greater than the taxes you owe.

Tax credits typically have more specific eligibility criteria than tax deductions. For example, they may require you to meet certain income thresholds, have a specific filing status, or claim a qualifying dependent.

Here are some of the most notable federal tax credits to consider pursuing:

• Saver’s Credit: A refundable tax credit to a qualified retirement plan worth 10%–50% of your contributions, up to a maximum of $1,000 for single filers ($2,000 for married couples) in 2024. Income must be below $38,250 for single filers and below $76,500 for married couples.
• Child Tax Credit (CTC): A partially refundable tax credit for those with qualifying children under age 17. It’s worth $2,000 per child, with up to $1,700 refundable in 2024. The CTC starts phasing out at $200,000 in income for single filers and $400,000 for married couples.
• Premium Tax Credit: A refundable tax credit for those who purchase health insurance through the Health Insurance Marketplace. Typically, your income must be between 100% and 400% of the federal poverty line for your family size to qualify. 

Consider Adjusting Your Tax Withholding

If you’re a W-2 employee, your employer withholds taxes from your paychecks based on the information you provide on your Form W-4. Withholding more increases your odds of receiving a refund, while withholding less raises the risk of owing and triggering underpayment penalties.

Getting a tax refund may feel satisfying, but it means you’ve effectively given the government an interest-free loan. Ideally, you should aim to break even at the end of the year, minimizing both your refund and your risk of owing.

Consider revisiting your W-4 form to fine-tune your withholding, especially if you significantly under- or over-withheld last year, experience a change in filing status, or get a new dependent. The IRS Tax Withholding Estimator can help inform your efforts.

Explore Advanced Tax Strategies

Once you’ve covered the fundamentals, you can explore more advanced tax strategies to further increase your savings. However, some strategies don’t apply to every situation, and others may carry added risk.

Here are some advanced tax strategies to consider:

• Tax loss harvesting: If you have investments in taxable accounts that have lost value, you can sell them to offset capital gains from assets that have increased in value. However, you must avoid repurchasing substantially identical investments for at least 30 days to avoid triggering the wash sale rule.
• Tax-efficient investing: The account you hold an investment in can affect how much you pay in taxes. For example, placing high-dividend stocks in tax-deferred accounts—like a 401(k) or IRA—is often beneficial to shield the income they generate from taxation.
• Income and expense timing: Your taxes may benefit from collecting income or paying deductible expenses sooner or later. For example, if you’ve already had multiple medical procedures during the year, paying any outstanding bills before year-end could help you exceed the threshold for deducting medical expenses and make itemizing more worthwhile.

Seek Professional Tax Advice

The more complex your tax situation, the more beneficial professional guidance becomes. A tax expert, such as a certified public accountant, can help ensure you maximize your deductions, claim all available tax credits, and develop a sophisticated long-term tax strategy.

To find a quality advisor, ask for referrals from your network or search online for the best local tax professionals in your area. To screen potential candidates, read through reviews from previous customers and use free consultations to gauge their suitability for yourself.

The Bottom Line 

Maximizing your tax return can be complex, but it’s easier when you take it step-by-step. Start by choosing the most favorable filing status, then claim every credit and deduction you qualify for. Avoid paying too much or too little in taxes during the year by adjusting your withholding or estimated payments. When you’re ready for more advanced strategies, consult a tax professional to make sure you execute them correctly.