9 Smart Tax Moves To Get a Bigger Return in 2025

The average tax return received in 2024 was over $3,050. If you didn’t receive that big of a return, it’s never too early to start thinking about your tax return for next year.

By taking a few simple steps now — you can potentially boost your refund when tax season rolls around. Here’s what you can do right now to get a bigger tax return in 2025 and boost your bank account .

1. Understand the difference between tax deductions and credits

Taxes can be complicated, but to maximize your return, it's important to distinguish between tax deductions and credits. Tax deductions reduce your taxable income, which indirectly lowers the amount of tax you owe.

Tax credits are direct reductions in the amount of tax you owe. Some tax credits are refundable, meaning if you owe less than $0 in taxes, you will get the tax credit refunded to you.

Not everyone qualifies for every deduction or credit, but you can take as many as you qualify for to put more money in your pocket .

2. Recalculate your withholdings

If you owe taxes this year, take a minute to double-check your withholding status to make sure it's in line with your current tax situation. Life changes like getting married, having a baby, or going through a divorce can all impact your taxes.

Use the IRS withholding calculator to fine-tune the amount taken out of your paycheck. The more you withhold, the bigger your refund could be. Remember though, if you withhold more than you should, you’ll have to wait all year to get your money back.

3. Max out your 401(k)

If you have access to a 401(k) through your job, consider contributing as much as you can. The IRS limit is $23,000 for 2024. Plus, an additional $7,500 for filers over age 50, known as a catch-up contribution.

Not only does this lower your taxable income for the year, but it also benefits your retirement. You won’t get any tax credit for any employer match or contributions, but you will have access to those funds during retirement.

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4. Contribute to a Traditional IRA

Individual Retirement Accounts (IRA) is another way to save for retirement. Contributions to this type of retirement account are often tax-deductible, which means you get an instant tax break while your savings grow tax-deferred until retirement.

The IRS limits for 2024 are $7,000 for those under age 50 and $8,000 for those over age 50.

However, if you or your spouse is already eligible for a retirement plan at work, you may not qualify for the full tax deduction based on your filing status.

5. Donate to charity

Support the charities close to your heart while lowering your taxable income. Charitable contributions to eligible organizations can help reduce the amount of tax you may owe.

However, you must keep track of your contributions with receipts so you can claim deductions on your tax return.

6. Enroll in an HSA

If you have the option, consider signing up for a health savings account (HSA) to put away money for medical expenses. Contributions to an HSA are tax-deductible, and you can use the funds tax-free for qualified medical costs.

You must have a high-deductible health care plan to be eligible for this account. The IRS limits for 2024 are $8,300 for a family and $4,150 for individuals. They also allow an additional $1,000 catch-up amount for those over age 55.

7. Take advantage of energy tax credits

Make your home more energy-efficient and score some tax credits in the process. There are many types of energy credits, but you can get up to $3,200 by installing solar panels, upgrading to energy-efficient appliances, or replacing your insulation. Your state may also offer separate tax credits as well.

8. Avoid capital gains taxes

Capital gains tax is owed when you sell an investment or asset. If you hang onto your investments for more than a year, you can qualify for lower long-term capital gains tax rates rather than paying your ordinary income tax rate — which is probably higher.

9. Work with a tax professional

The IRS tax code is thousands of pages long, even longer when you add in supplemental documents. If you team up with a tax pro or financial advisor, they can help you navigate the ins and outs of the tax code so you can make the most of your refund.

The biggest benefit of working one-on-one with a professional is they can offer personalized advice.

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Bottom line

A bigger tax return isn’t always a good thing. Sure, it’s nice to have a windfall of cash coming in once a year, but the money you receive is actually yours — the IRS is just returning it to you.

Experts recommend that if your tax return is over $1,000, you should adjust your withholdings so you don’t overpay during the year. It’s just one of several smart money moves you can make to build wealth.

Money tips that can work for everyone

No matter what your bank account balance is, there's always an opportunity to optimize and improve your finances. Here's a quick checklist of things you can look at today.

Focus on paying off your debt. Debt can hold you back from making progress with your overall financial well-being. Aside from cutting expenses, there are tools that can help you pay off debt faster like balance transfer credit cards and debt counseling.

Earning extra income can give you breathing room. If finances are tight, earning some extra money to supplement your income can make a huge difference. A new job is one option to consider, but if you're not ready to make a big change or already retired, a part-time side job could be a better choice.

Cut your expenses. It sounds painful and so not fun, but it doesn't have to be. Take a look at your biggest expenses because that's where you'll probably find the biggest savings. For example, auto insurance rates have been soaring so shopping around for a new insurance company can be the fastest way to cut your bill. Also, look for ways to cut your grocery bill (despite rising inflation).