March 24, 2025Tips to Maximize Your Tax Refund

With tax season upon us, taxpayers are looking for ways to maximize their potential refund checks. While this time of the year can often feel overwhelming, it’s also an opportunity to reclaim your hard-earned money. Whether you’re filing for the first time or looking to optimize your return, understanding key deductions, credits, and strategies can make a significant difference.  

In this article, we’ll walk you through practical tips to help you maximize your tax refund, reduce your taxable income, and take advantage of every dollar you’re entitled to. Get ready to file with confidence and make the most of this tax season.  

Choose the Right Filing Status  

It’s important to pick the appropriate filing status that reflects your circumstances. Your status directly impacts your return, so choosing the right one can maximize your refund. The IRS provides five different statuses to choose from:  

• Single: If you’re unmarried, divorced, or legally separated.  
• Married Filing Jointly: If you’re married or your spouse passed away within the tax year.  
• Married Filing Separately: If you’re married and don’t want to file jointly, or you find that filing separately lowers your tax bill. Most couples tend to save more by filing jointly; however, it might be worth exploring depending on your circumstances.  
• Head of Household: If you’re single with qualifying dependent(s) and paid more than half of the living expenses for yourself and the dependent(s).  
• Qualifying Surviving Spouse: If your spouse passed away within the previous two years and you have a dependent child.  

Although the options may seem straightforward, many taxpayers get confused and pick the wrong one, which can impact their taxes through missed savings or higher-than-expected payments.  

Not sure which status suits you? The IRS offers a free Interactive Tax Assistant to help you determine the appropriate status to ensure you maximize your benefits and avoid unnecessary complications.  

Look for Available Credits  

If the opportunity to save on your taxes is there – take it! You may be surprised to learn how many credits, deductions, and other benefits you qualify to receive. These tax perks can help to significantly reduce your tax bill, boost your refund, and ultimately, put more money back in your pocket. 

There are generally two tax benefits: credits and deductions. 

• Tax Credit: A set dollar amount that reduces your current tax bill.  

Example: If you owe $10,000 in taxes but qualify for a $2,000 tax credit, you will owe Uncle Sam a total of $8,000. 

• Tax Deduction: A deduction reduces your total taxable income. 

Example: You earned $60,000 this year but qualify for a $5,000 tax deduction. Your taxable income will be $55,000. 

Most tax benefits fall under one of the following categories: 

• Family & Dependents: Includes the Child Tax Credit, Adoption Credit, Child and Dependent Care Credit, and more.   
• Income & Savings: Includes the Earned Income Tax Credit (EITC), Retirement Savings Contributions Credit, and more.  
• Homeownership: Includes the Mortgage Interest Credit and other qualifying deductions.  
• Healthcare: Includes the Premium Tax Credit (PTC) for taxpayers who buy health insurance in the marketplace and other qualifying deductions.  
• Education: Includes the Lifetime Learning Credit (LLC), the American Opportunity Tax Credit (AOTC), and more.  

Not sure which tax benefits you qualify for? The IRS Interactive Tax Assistant can also help you determine eligibility for various savings opportunities to maximize your refund.  

Don’t Overspend on Tax Prep  

Many people believe they need to hire a CPA or a tax professional to prepare their taxes. This avenue can be costly and reduce the amount of your refund. The truth is that most taxpayers will benefit just as much or more from free options available online.  

For example, the IRS recommends eight companies they partner with to file your federal taxes for free. Other free or low-cost options include popular companies such as TurboTax or H&R Block. 

If you’re a small business owner, real estate investor, paid hefty medical bills during the year, or generally have a complex return, it’s wise to consider a tax professional. While the costs might be higher, their attention to detail and knowledge of tax law can help minimize your tax bill. 

Avoid Instant Refunds & Quick Cash Offers  

You’ve likely seen ads claiming to provide instant access to your tax refund. Unfortunately, most of these “instant” refunds or fast cash claims are loans, like payday loans, with high interest rates and excessive fees. Some providers even claim a percentage of your refund as their payment for providing “early release” of your funds.  

Despite what companies may claim, no one can speed up your payout from the IRS. These offers only allow you to borrow against your own refund, putting you on the hook to pay more money in the long run with fees and interest.  

Choose Direct Deposit  

The quickest way to receive your tax refund is to file early and choose direct deposit. Let’s look at some of the benefits of direct deposit:  

• Receive Your Funds Faster:  

Selecting direct deposit as your preferred method when receiving your tax refund ensures you receive your money faster. You will typically receive your refund within 7-10 days after you file, instead of waiting weeks for a paper check to arrive in the mail.  

• More Secure Than Other Methods:  

If you receive your refund via check in the mail, you might worry about it getting delayed, lost, or stolen. But with direct deposit, your funds are placed straight into your selected account.  

• Immediate Access to Your Money:  

Once your refund is deposited, you have immediate access to your money; unlike paper checks, where you might have to wait to cash it, or your financial institution may issue a hold until the check clears.   

• Split Your Refund:  

Direct deposit also allows you to split your refund between more than one account. You can immediately put a portion toward your savings, loan payments, or designate it for other financial goals. 

Bonus Tips: Smart Ways to Use Your Tax Refund 

Want to maximize your savings and your earnings? Make your tax refund go further by using a portion to improve your financial situation and achieve goals.  

• Pay Down Credit Card Debt: Reduce high-interest debt, improve your credit score, save on interest payments, and free up more funds in your budget. 
• Kickstart Your Emergency Fund: Expand your financial safety net and enjoy more of a cushion when facing unexpected expenses.   
• Put It Towards a Down Payment: Saving for a new car or home? Fortify your down payment to reduce your loan amount and save more in interest.  
• Boost Retirement Savings: Maximize your tax-advantaged account contributions, such as your 401(k), IRA, or HSA. If your employer offers a 401(k) match, consider contributing the required amount. After all, it’s basically free money!  
• Cover Education Expenses: Have you been thinking about going back to school? Use your refund to cover tuition and supplies or contribute to your child’s college fund. 
• Upgrade Your Home: Knock some items off your project list and make your home more enjoyable. Many improvements can also help increase your home’s value – it’s a win-win! 
• Invest It: If the rest of your finances are in good condition, investing allows you to put your money to work for you and increase your earnings.  

We’re Here to Help! 

It’s doubtful that anyone has filing their taxes on their bucket list! The whole process can be stressful and time-consuming. However, filing also opens the door to you receiving a favorable refund that can bolster your bottom line. Take time and research your tax filing options and potential credits and deductions. You might be surprised by how much Uncle Sam gives you back! 

If you want to learn more about strategic ways to achieve financial goals with your tax refund, we’re here to help. Please stop by any of our convenient branch locations or call 800-226-6673 to speak with a Member Advocate.  

 

Each individual’s financial situation is unique and readers are encouraged to contact PEFCU when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.