Tax refunds are up from last year—here are 4 ways you can get more money back
After a couple of weeks of lower tax refunds, Americans have started to see a shift in their favor.
For the week ending Feb. 22, although fewer people received a refund when compared to the year before, the average refund check that did go out was worth $3,143, according to the IRS. That's a 1.3 percent increase compared to the same time last year.
While it's important to remember that how much you receive or owe depends on your individual financial situation, if you haven't filed yet, there are several things you can try to maximize your refund.
Here are four steps you can take.
Take advantage of credits
In 2019, families with children who are able to claim the Child Tax Credit (CTC) are likely to see the biggest refunds, especially if they live in low-tax states like Texas, Washington or Wyoming. They're able to deduct up to $2,000 per qualifying child, up from $1,000 previously.
Other common tax credits include the Earned Income Tax Credit (EITC), which helps those with low-to-moderate incomes; the Retirement Savings Contributions Credit; and credits to cover educational expenses.
Plus, many credits are refundable, so you could get money even if you don't owe the IRS anything.
Rethink your filing status
If you're married, filing jointly won't automatically earn you the largest possible return. A "marriage penalty" can affect couples when tax-bracket income thresholds, deductions or other credits aren't doubled for married filers.
"Typically it occurs when two individuals with identical or similar incomes are married," Robert Westley, a CPA who serves on a credentialing committee for the American Institute of CPAs, told CNBC.
Although the new tax laws eliminated the issue for many taxpayers, it still could affect you depending on where you live and how much you and your partner earn.
If you're unsure if filing jointly or separately would be most beneficial for you and your spouse, you can use an online tax calculator, such as the ones from H&R Block or TurboTax, to do the math yourself, or ask a qualified professional to crunch the numbers.
Max out your IRA
Did you max out your IRA in 2018? If not, you have until April 15 to contribute up to $5,500. That limit rises to $6,500 if you're 50 or older. Assuming you meet the requirements, the money you put into your IRA reduces your taxable income for the year.
"Say you're earning $50,000 a year," Andrea Coombes, a tax specialist at NerdWallet, explains. "If you qualify for a deductible contribution and you can put in $5,500, the maximum in 2018 if you're under age 50, that will drop your taxable income to $44,500. If your top tax rate is 22 percent, you're shaving $1,210 off your tax bill, and you're saving for retirement, too."
This only applies to traditional IRAs, not Roths. There are other restrictions as well, so read up before you contribute.
You may be able to earn an additional benefit if you qualify for the Retirement Saver's Contributions Credit, which can be worth up to $2,000, depending on your income.
Contribute to an HSA
Putting money in a health savings account, or HSA, can also lower your taxable income.
To qualify for an HSA, you need to first have a high-deductible health care plan, and there are other restrictions, too. As with retirement savings accounts, you can contribute pre-tax dollars to an HSA and you'll only pay taxes when you withdraw the money.
For 2018, individuals can put a maximum of $3,450 into an HSA, and families can put in $6,900. And you can make a 2018 contribution right up until the the filing deadline on April 15.
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