Do you get a bigger tax refund if you make less money? No, that’s a misconception. Some people worry that if they get a raise or a bonus that pushes them into the next bracket, they’ll get a smaller refund. However, that’s not how the tax system works in the U.S.

Different levels of income in the U.S. are taxed at different rates. The tax refund you’ll get will mostly depend on how much of your salary is withheld. In this guide, we’ll talk about strategies to get a bigger tax refund.

How Do Tax Refunds Work?

Taxpayers get a refund when too much money is withheld when they file taxes, usually from the end of January until mid-April. On the other hand, you’ll owe tax debt to the IRS if there’s too little money withheld.

Here are some other reasons why you may get a refund:

  • You’re eligible for refundable tax credits, the amount of which is larger than what you owe in taxes.
  • You’re self-employed or a freelancer who overpaid your quarterly estimated taxes.
  • You didn’t update your W-4 when your circumstances changed, for example, the birth of a child.
  • You made an error on your W-4 that resulted in a higher withholding.

Tax Deductions vs. Tax Credits

tax credit is a reduction of the income tax you owe. Common tax credits like the Child Tax Credit and Earned Income Credit directly reduce the amount of taxes you owe. Tax credits can be refundable or non-refundable. With a refundable credit, you can receive the balance as a part of your tax return. 

A tax deduction can lower your taxable income and result in lower tax liability. The savings you can get from a tax deduction will depend on your tax rate. For example, a deduction provides higher tax savings if you’re in the top tax bracket.  

6 Ways To Get a Bigger Tax Refund

If you’re wondering how to get a bigger tax refund, you’re not alone. There are many strategies you can use to optimize your refund, and we’ve listed the top ones below.

1. Itemize Your Deductions

The way you claim deductions on your income tax return can dramatically impact your tax refund. Many people opt for a standard deduction, which is a fixed dollar amount that reduces the income on which you owe taxes.

“Itemizing your deductions is the best way to maximize your refund, regardless of how much money you do or don't make,” says Teresa Dodson, a financial expert and the founder of Greenbacks Consulting.

An alternative is to select your deductions one by one, which can often lower your taxable income more than a standard deduction. You can then subtract the total deduction amount from the adjusted gross income (AGI). Taxpayers can claim the following itemized deductions:

  • Charitable contributions
  • Gifts to non-profit
  • Mortgage interest
  • Real estate taxes
  • Unreimbursed dental or health care expenses exceeding 7.5% of adjusted gross income
  • Local and state sales and income taxes

We also recommend reviewing your Form W-4 to ensure the information is accurate and updated since it can impact the amount of refund you receive. Here are a few other tax deductions you can claim when filing taxes:

  • If you’re a teacher, the Educator Expense Deduction allows you to deduct up to $300 from your income in 2023 for eligible expenses, such as classroom supplies and books.
  • If you’re self-employed, there are a number of deductions you can claim, such as business travel expenses, health insurance premiums, business insurance, office supplies, rent, and more.
  • You can also deduct up to $2,500 in student loan interest, depending on your filing status and income.
  • If you sustained any personal casualty or theft losses, you can deduct these expenses if they can be attributed to a federally declared disaster.
  • Any donations you make to a qualified charitable organization are also deductible.

2. Use Retirement Accounts

Any contributions you make to 401(k), 401(b), traditional IRA, or other employer-sponsored plans are tax deductible in the year in which you make contributions. IRA contributions should be made before the tax filing deadline, which is April 15, 2024.

The annual contribution limit for 401(k) plans is $23,000 for 2024, and the catch-up contribution limit is $7,500. Contributions to Roth 401(k) and Roth IRA are not tax-deductible.

You can reduce your taxable income by contributing to your retirement accounts, which can help you get a bigger tax refund.

3. Claim the Right Credits

You can also increase the amount of tax refund you get by claiming tax credits. Check your eligibility for the tax credits we’ve listed below:

  • Earned Income Tax Credit (EITC): This tax credit is available for low- and moderate-income earners. Tax credit amounts can range from $600 to $7,430, depending on your income, number of children, and tax filing status.
  • Child Tax Credits: If you have children under the age of 16, you may qualify for Child Tax Credits up to $2,000 for every qualifying child.
  • Child and Dependent Care Credit: If you paid for childcare or care services for a qualifying dependent or disabled spouse, you may qualify for this tax credit.

4. Fill Out Your W-4 Accurately

If you’re wondering how to get a big refund on tax, it’s important to fill out your Form W-4 correctly. The more accurately you fill out your W-4, the less you’ll owe or be owed when you file your taxes. 

You can choose to specify how much taxes should be taken out of your paycheck. For example, if you place a “0” on line 5, you indicate that you want the most tax taken out of your pay every pay period. The higher this allowance number, the less tax will be taken out of your paycheck, and the lower the amount of refund you may get. 

You can also receive a bigger tax refund by adjusting line 4(c) on your W-4, which allows you to opt in for “Extra Withholding,” including any amounts from your Multiple Jobs Worksheet. Entering an amount on 4(c) will reduce your paycheck but increase your refund amount. 

Use a Tax Withholding Calcualtor to estimate how much income tax you want your employer to withhold. It will also allow you to see how different withholding amounts will impact your tax due, take-home pay, and refund.

5. Increase Your Savings and Investments

Setting aside money in a tax-advantaged account is a great way to build your retirement nest egg and get an additional tax refund. You can fund your traditional IRA, and your contributions may be deductible.

Try to take advantage of your employer’s matching contributions and max out your 401(k) to get the most tax refund. The more tax benefits you qualify for, the higher your tax refund will be.

6. Get Professional Advice

A qualified tax professional with knowledge of the U.S. Tax Code can help you find all of the available deductions and credits and reduce your tax bill. They can provide guidance on how to get a big refund on tax, make decisions about dependents and filing status, and get tax breaks.

Professional advice can be even more beneficial if you have a complicated tax situation due to inheritance, a side business, or investment income. Start planning for the next year’s filing season by consulting a tax preparation expert early.

Plan Your Tax Returns To Get a Bigger Refund With Low Income

There are many ways to increase your tax refunds, such as adjusting your withholding, taking advantage of tax credits and deductions, and investing in your retirement accounts.

Do you get a bigger tax refund if you make less money? No, you can get a bigger tax refund even if you’re in a higher tax bracket by using the strategies we’ve listed above and by consulting a qualified tax professional before the tax season.

Once you receive the money back in your bank account, we recommend using it to pay down high-interest debts or putting it aside for emergencies or planned expenses.