How to Maximize Your Tax Refund in 2022November 11, 2022
As of last year, the average tax refund was $3,651. This year, we should expect a slightly smaller refund. Most people file their taxes earlier in anticipation of a large refund. However, you should be aware that Social Security taxes are not included in your refund. As a result, your refund will be smaller. Here are some ways to maximize your tax refund.
Average tax refund in 2019 was $3,651
The average tax refund in the U.S. was $3,651 in 2019. The largest refunds went to taxpayers in Wyoming, with an average of $5,027. This is the second consecutive year that the state has led the way, increasing its average tax refund by 8% from $4,602 the year before. Next in line were taxpayers in Connecticut, New York, and Vermont.
According to the Internal Revenue Service, seventy-three million people received a tax refund last year. In fact, it’s possible that some of these taxpayers will receive refunds significantly higher than the national average. Using IRS data, LendingTree analyzed state-by-state returns and found that thirteen states had average refunds higher than the national average, while 37 states had smaller refunds.
Taxpayers in West Virginia received the lowest average tax refund. They paid $1,800 less than the national average, and $3,500 less than their Massachusetts counterparts. Interestingly, only 14% of taxpayers in West Virginia owed taxes at the time of filing. Meanwhile, residents of several Midwestern states had the lowest average tax bill.
Expect a smaller refund this year
There are a lot of reasons why you might be expecting a smaller tax refund this year. For instance, you may have made more money this year than you did last year, but the government cut some credits to make up for it. Maybe you worked more hours this year than you did last year, or you got a pay increase. You may also have received a smaller refund due to the expansion of the Child Tax Credit.
Regardless of the reasons for the smaller refund, there are a few things you can do to prepare yourself for the changes. First, you should schedule an appointment for a mid-year tax checkup. Many taxpayers have a smaller refund this year, and you can take steps now to make sure that your refund will be larger in 2023. Also, you should do your taxes as early as possible. Getting your taxes done early will allow you time to adjust to these changes.
Lastly, if you owe money on student loans, expect a smaller tax refund this year. In the first quarter of the year, the U.S. Department of Education froze interest on student loans. Another factor is the pandemic shutdowns, which eliminated a $2,500 above-the-line deduction. This means that you will get more taxable income, but a smaller tax refund.
Social Security taxes are exempt from tax refunds
Social Security taxes are not included in average tax refunds. In fact, about half of all families are expected to owe some Social Security tax on their benefits by the year 2020. By 2050, the share of benefit income that is taxed will be close to twelve percent.
Social Security taxes are payable on any benefit income over a base amount. In 2022, this limit is $25,000 for single filers and $32,000 for joint filers. If married couples file separate returns, they may also have to pay taxes on the Social Security income that they receive. The tax amount will depend on the combined retirement income of the couple. However, in no case will a married couple have to pay more than 85% of their Social Security income.
However, this exemption isn’t a permanent change. The rules changed in 2010, and benefits received prior to the changes are still subject to Social Security taxation. As of this year, the IRS will continue to assess the value of Social Security benefits for taxation.
Ways to get a bigger refund
Tax strategies vary depending on your situation. For example, business owners have different tax strategies than employed people. Young single parents often use different tax strategies than older married couples. But there are some common tips that will help you maximize your tax refund. One such tip is using tax deductions and credits. These can lower your tax liability dollar for dollar.
Keep your receipts. Keeping these receipts will allow you to claim more expenses. Adding them to your tax return will increase your refund. You can also claim mobile phone bills. This is because you can claim the data and calls that you use for your work. You can also use your tax refund to purchase gifts for family members.
While you can’t control whether or not you pay your taxes, you can definitely control how much you receive. A tax refund is a great way to save for big purchases. Many people enjoy having a large chunk of cash at once.