how to know what you will get back for taxes

How Much Tax Volition I Get Back?

The amount of revenue enhancement you will get dorsum in this year's refund depends on factors such as your income, number of dependents and type of deduction. You tin estimate the amount of this twelvemonth's refund by comparing the amount you lot owe to the corporeality that was withheld from your paychecks throughout 2021, or by using an online tax refund calculator.

• Written By Jennifer Schell
• Edited By Emily Miller
• Financially Reviewed By Chip Stapleton
• Updated: March 31, 2022
• This page features 26 Cited Research Articles

How To Judge Your Tax Refund

More than half of all revenue enhancement filers in the United States received a tax refund in 2021 for the 2020 tax year, according to the IRS. Figuring out what you'll become back on your tax return tin can help you program for the impact your refund will have on your personal finances. You can estimate your tax refund easily with a few key pieces of information and a fleck of math.

Earlier diving into the math, it's of import to sympathize the difference between your tax return and your tax refund. A revenue enhancement return is the form you file annually that outlines your income, expenses, investments and other tax-related information. The information on your revenue enhancement render will determine whether you receive a tax refund.

You get a tax refund when you pay more than taxes to your state government or the federal regime than your actual tax liability. A refund is a check from the government for the amount y'all overpaid.

The showtime pace in estimating your tax refund is to calculate your taxable income. Taxable income can exist calculated every bit your gross income minus all deductions. At that place are 2 types of tax deductions: standard and itemized.

The IRS determines a standard deduction to reduce each taxpayer'south taxable income past a certain amount based on factors like filing status, age and number of dependents. An itemized deduction requires you to keep runway of expenses similar home mortgage interest and charitable contributions to deduct from your taxable income when you lot file your render. What's left after all available deductions is your taxable income.

Y'all Should Know: Table salt Deductions

If you lot choose an itemized deduction over the standard deduction when you file your federal tax return, y'all can deduct most state and local taxes, including income, property and real estate taxes. This is known as the SALT (State and Local Tax) deduction, and the total corporeality that can be deducted is capped at $ten,000.

One time you lot find out your taxable income, the side by side step to estimating your refund is to apply your tax subclass. Your tax bracket determines what percentage of your taxable income the government collects. So if you earn a higher income, you'll pay a higher percentage of that income in taxes. That progressively increasing percentage is your marginal tax rate.

By applying your marginal revenue enhancement rate to your taxable income, yous tin guess how much taxation you owe in that tax year.

Throughout the revenue enhancement year, well-nigh employers withhold some tax from their employees' paychecks and pay it to the IRS on their employees' behalf. This is what'due south chosen taxation withholding.

If the amount y'all owe is greater than the amount your employer withheld from your paycheck, you must pay taxes to the IRS. More than commonly, though, you lot'll end up owing less than the amount withheld, which ways the IRS will pay the difference dorsum to you in the grade of a tax refund.

Allow's look at an case. Say you lot're a single filer who makes $l,000 annually.

How Much Will My Tax Refund Be If I Make $50,000?

Calculate your taxable income.

Your taxable income is your gross income of $fifty,000 minus your deduction. The standard deduction for a single filer in the 2021 tax year is $12,550, which puts your taxable income at $37,450.

Apply the marginal taxation rate.

For a single filer, your income up to $9,950 is taxed at x%, which amounts to $995 in taxes. The remaining $27,500 is taxed at 12%, which comes to $3,300. Your total tax liability for the 2021 revenue enhancement year is the sum of those amounts, or $4,295.

Subtract from withholdings.

Finally, subtract your taxation liability from the amount of revenue enhancement withheld past your employer. Yous can find this number on your W-2. Let's say your employer withheld $half-dozen,000 in taxes this year to pay to the IRS on your behalf. Subtract the $4,295 in taxes yous owe from the $half-dozen,000 withholdings, and yous tin estimate a refund of about $1,705 for the 2021 tax yr.

Tax Refund Calculator

If all that math looks a footling intimidating, or if your state of affairs is a bit more than circuitous than the above scenario, don't worry. Below, you'll observe a Revenue enhancement Refund Calculator. Merely input some information similar your filing status, dependents and yearly wages, and you'll get a rough guess of what your tax refund will be for the yr.

How To Maximize Your Tax Refund

There are several means you can get a bigger refund on your taxes this twelvemonth. Here are but a few of the all-time ways to maximize your refund.

Top 5 Tips to Become Your Maximum Taxation Refund

Claim your dependents.

Claiming whatever children or other relatives who rely on you for financial support entitles you to sure deductions and tax credits, such as the kid tax credit and the child and dependent care credit. The child taxation credit has increased to $3,000 or $three,600 per child, so it's important to claim all your dependents if you desire to get the maximum refund.

Itemize your deductions.

The standard deduction knocks a decent chunk off of taxable income, and for most taxpayers, it's the better deal. Just it's worth looking into whether an itemized deduction, where you deduct individually for items like charitable contributions or medical expenses, could save y'all more money than opting for the simpler standard deduction.

Contribute to retirement funds.

If y'all contribute to a 401(chiliad) or a traditional IRA, maxing out your contributions tin can aid you save on your tax return. Traditional IRA and 401(chiliad) contributions are deducted from your taxable income, so y'all won't take to pay taxes on the money you put in those accounts. Remember, you lot tin can even so contribute to an IRA for 2021 through April 15.

Harvest tax losses.

You lot can plough lost value on investments into a lower tax bill through a process called taxation-loss harvesting. With this strategy, you can sell investments, such every bit common funds, that have lost value over the year and purchase essentially similar investments to supercede them. You stop up realizing a loss for tax purposes, simply your investment may in fact gain value depending on how the replacement fund performs over the year. Tax-loss harvesting lets you report losses to commencement the investment gains y'all may owe taxes on, resulting in a lower investment income revenue enhancement liability.

Apply all available credits.

Aside from credits for challenge dependents, there are other less common credits you lot may qualify for. If y'all've made home improvements aimed at reducing your carbon footprint, you may be eligible for the residential energy property credit. Workers with depression to moderate income and families may qualify for the earned income tax credit (EITC). And if you or your spouse went dorsum to school this year, you may be able to save some money with the lifetime learning credit.

Figuring out how to maximize your refund tin can involve some pretty in-depth knowledge. If the process seems a bit overwhelming, talking to a CPA or revenue enhancement professional can assistance make certain y'all don't miss anything.

How Practise Revenue enhancement Credits Work?

A tax credit is subtracted directly from the amount of tax you owe, and then information technology reduces your total revenue enhancement liability dollar for dollar, and the value of the credit is the same for everyone who is eligible to receive information technology. This is different from tax deductions, which decrease from your taxable income.

The value of a tax deduction depends on your marginal taxation charge per unit, so the more income you lot earn, the less a deduction is potentially worth. Here are a few examples of the most common revenue enhancement credits claimed past taxpayers each year.

Most Mutual Tax Credits

Earned Income Tax Credit (EITC)

The earned income tax credit helps low- to moderate- income workers and families who meet certain requirements reduce their tax liability.

Child Taxation Credit (CTC)

You lot could increase your tax refund by thousands of dollars by claiming the child tax credit for each child you merits as a dependent. If y'all received an advance payment of part of your 2021 CTC under the American Rescue Plan, you can claim the rest of the CTC when you file your revenue enhancement render for the 2021 tax year.

Saver'southward Credit

Putting abroad money for retirement may entitle you to a "saver'southward credit" on your tax render. If you contributed to an IRA this year, the retirement savings contribution credit will reduce your tax liability past between x% and 50% of the amount of your contributions, depending on your income.

Education Credits

The IRS offers credits for qualifying pedagogy expenses, such as the American opportunity tax credit (AOTC) and the lifetime learning credit.

Most tax credits are nonrefundable, which means that tax credits are subtracted directly from the amount you owe, and then they cannot reduce your revenue enhancement liability below zero. If you are a low-income filer, you lot may not be able to claim all available revenue enhancement credits if doing so would reduce your amount owed to beneath zero.

You Should Know: Some Taxation Credits Are Refundable

Non all tax credits are nonrefundable. Some are fully or partially refundable, which means that if their value is more than the filer's income tax liability, the filer is paid the excess. Examples of refundable tax credits include the earned income revenue enhancement credit (EITC), which is fully refundable, and the child revenue enhancement credit (CTC), which can be refunded if the filer'southward earnings are greater than the $2,500 threshold.

How Practice State and Federal Taxes Impact Your Refund?

In improver to federal income tax, you may too pay country income taxes depending on where you alive. Y'all won't pay state income tax if you live in one of these eight states: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming.

New Hampshire doesn't taxation wages, simply does taxation dividends and involvement, though recent legislation has been passed to phase out this tax beginning in 2024.

If you lot live in one of the other 41 states, you'll need to file a land tax return in addition to your federal tax return. The IRS website contains a directory to assist yous discover information on your state's tax requirements.

Key Differences Between State and Federal Taxes

• State tax rates are typically lower than federal tax rates.
• States tin have different types of tax credits and deductions.
• The amount of tax withholdings will vary for country and federal taxes.

Related Tax Refund Questions

When should you expect your tax refund?

If you file electronically and opt to receive your refund via directly deposit, you can expect your tax refund to arrive within 21 days of submitting your return. If yous transport your return by mail, you lot should receive a refund in six to eight weeks from when the IRS receives your return.

How much is the child tax credit?

The IRS increased the kid taxation credit to $3,600 per child ages 5 and under at the finish of 2021, and $3,000 per child ages 6 through 17 at the terminate of 2021. The corporeality of the tax credit is reduced for filers at college income levels.

How do lenders know y'all owe taxes?

Although owing dorsum taxes or having a tax lien placed on y'all no longer shows upward on credit reports or affects your credit score, there are still ways mortgage lenders can bank check whether you lot owe taxes. When yous are trying to buy a house, your lender tin can discover out whether you take a tax lien filed confronting y'all or have unpaid taxes by conducting a search through public records.

What if you owe taxes and tin't pay?

Even if you tin't pay your taxes, you lot should nonetheless file a taxation return to avoid a steep penalty from the IRS. You can apply online for payment plans through the IRS to pay off your residue over time. Yous may too be able to negotiate an offering in compromise with the help of a tax chaser.

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Source: https://www.annuity.org/personal-finance/taxes/how-much-tax-will-i-get-back/

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