3 Tax Questions That Sound Small — But Change Your Refund Big Time
Written by
Caitlyn Moorhead
Edited by
Molly Sullivan
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Filing your taxes is filled with big numbers, sometimes to your benefit and, unfortunately, sometimes to your disadvantage. Your final refund or balance due boil down to important factors on your tax return, which aren’t necessarily dollar amounts at all. They’re simple yes or no tax questions that can quietly add or subtract thousands of dollars from your refund.
If you want to maximize your tax refund and avoid costly mistakes, pay close attention to these three tax questions that sound small, but when you ask them, can change your refund in big, beautiful ways. Here are some expert answers to those questions to help you out this tax season.
How Can You Reduce Your Tax Bill?
Number one with a bullet when it comes to filing your taxes is definitely figuring out ways to lower that bill. Whether it’s through tax adjustments, deductions or credits, legal loopholes or inclusion for your taxes shouldn’t be ignored. According to the tax experts and CPAs over at TurboTax, here are a few key takeaways as to where to start paying less when filing:
- You can likely reduce your taxable income by contributing to an employer-sponsored retirement plan like a 401(k) or your own individual retirement account (IRA).
- A high-deductible health plan with access to a health savings account (HSA) or flexible spending account (FSA) through your employer can also lower your tax burden.
- You may qualify for the child tax credit if you have dependents, which is a partially refundable credit worth up to $2,200 per qualified child for the 2025 tax year.
- Side hustlers, small-business owners and independent contractors can deduct many of the costs related to running and maintaining their gigs.
Do You Qualify For Any Deductions or Credits?
The good news is that nearly everyone qualifies for the standard deduction or itemized deductions that reduce your taxable income, but which ones? Though these are often the largest deductions available to you, before you can count that as money in the bank, make sure you are taking advantage of every one for which you qualify.
For example, the previously mentioned IRAs or HSAs can be a deduction for employees through Form 1040. Other common deductions include student loan interest or qualifying costs for your side gig.
The long and the short of it is that tax deductions and credits can reduce your tax liability, and a qualified CPA can help you identify the appropriate ones if you don’t feel comfortable doing so. If you do, consider deductions like rent, utilities, employee salaries, travel and more. Credits that reduce your tax burden can include qualifying for the research and development tax credit or the work opportunity tax credit.
If you’re wondering the difference between a tax credit and a tax deduction, or just want to know which is better, most CPAs would advise that a credit is often preferable to a deduction, but it’s on a case-by-case basis. This is because, according to TurboTax experts, “tax credits reduce your tax liability dollar-for-dollar while tax deductions lower your taxable income. For example, if you prepare your taxes and have a total tax bill of $10,000, a $1,000 tax credit would reduce your bill by that amount.”
How Do You Stay Current With Changes in Tax Laws?
The nitty-gritty of tax laws can be overwhelming to try and figure out in the best of times, but when there are changes to how you should file or in the tax laws themselves, it becomes more so. This is where seeking the professional financial advice of a CPA can provide you with the clarity you need to not only make sure you’re filing correctly but also get the most on your return.
If you prefer filing your own taxes without assistance, staying abreast of the newest tax laws can be done in a variety of ways. For example, some of the best methods to avoid filing errors in the new tax season include subscribing to IRS e-News and QuickAlerts, reading professional publications from such heavy hitters as Bloomberg Tax or even setting up alerts on legal research platforms.
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