Tax-Saving Tips with Financial Advisor Jeff Wong

Ways to Get a Bigger Tax Refund

MILWAUKEE, Feb. 18, 2024 – Paying taxes is a necessary part of life, but maximizing your refund requires some know-how.

How do tax returns work?

When you file your tax return, you provide the IRS with the information it needs to determine your tax liability for the year–your income, interest, or capital gains you may have earned, any deductions or credits you are claiming, your filing status, etc.

“The IRS will use this information to determine how much taxable income you have for the year, which tax bracket you fall under, and ultimately what your total tax bill is for the tax year,” said Jeff Wong, Northwestern Mutual Financial Advisor based in San Francisco. “If you have overpaid your taxes throughout the year, you’ll get a tax refund. If you underpaid throughout the year, you’ll end up owing money.”

How to maximize your tax refund

Here are some actions you can take that can help you get the most back on taxes:

1. Itemize your deductions
Deductions are expenses you’re able to subtract from your taxable income, reducing the amount you’ll owe in taxes. You can choose between the standard deduction or itemized deductions based on eligible expenses. While most taxpayers opt for the standard deduction, itemizing may be more beneficial if you have substantial deductible expenses.

The standard deduction is the baseline tax deduction that all taxpayers are entitled to if they choose to forego itemization. For the 2024 and 2025 tax years, the standard deduction is:

2. Contribute to tax-advantaged accounts

Another way to lower your taxable income for the year is to contribute to one or multiple tax-advantaged accounts. Examples of tax-advantaged accounts that you might consider contributing to include:

Retirement accounts: When you contribute to a traditional retirement account—such as a 401(k), 403(b) or IRA—you are making pre-tax contributions that reduce your taxable income. (Contributions to Roth accounts are made after taxes and do not lower your taxable income in the current year.)
Health savings accounts (HSAs): Contributions to an HSA, used to cover qualified medical expenses, are made with pre-tax funds and therefore will lower your taxable income for the year.
529 college savings plans: Contributions are made with after-tax funds, so they will not lower your federal income. But depending on your state (and the plan you are contributing to) these contributions may lower your taxable income on your state tax filing.

3. Ensure you are claiming the right credits

A tax credit is a dollar-for-dollar reduction in the amount of taxes that you owe the IRS. This makes them even more valuable than tax deductions, which simply reduce your taxable income for the year.

You can claim a tax credit even if you don’t owe the IRS any money, but it depends on whether the credit is refundable or non-refundable. Refundable tax credits, while rare, don’t just lower your tax bill—they can boost your refund.

There are many credits, refundable and non-refundable, that you may be entitled to. Here are some of the more common tax credits you should be aware of:

If you earned a low income: The Earned Income Tax Credit
If you contributed to retirement savings: The Retirement Savings Contributions Credit (Saver’s Credit)
If you’re a parent: The Child Tax Credit, Adoption Credit, and Child and Dependent Care Credit
If you or your dependents were in college: The American Opportunity Tax Credit and Lifetime Learning Credit
If you invested in clean energy: The Residential Clean Energy Credit and New Clean Vehicle Tax Credit

4. Adjust your filing status

Your tax filing status will directly affect your standard deduction. It will also affect which tax bracket you fall under and which tax credits you are eligible to claim.

A single filer, for example, will qualify for a much lower standard deduction compared to someone filing as a head of household. Married couples can decide if they’re better off filing jointly or separately, depending on their incomes and other factors.

Is it better to owe taxes or get a refund?

If your tax planning approach is aimed at getting as large a refund check back from Uncle Sam as possible, you’re not alone. In 2024, an estimated 66.8 million taxpayers received a refund, with an average refund of $3,011.

But most financial experts agree that getting back a large refund isn’t really something that individuals should be aiming for. The best-case scenario would actually be to fine-tune your withholdings so that you’re having the right amount of taxes taken out of each paycheck. When tax season comes around, this means you may not be getting a check back—but you won’t owe one, either.

The benefit of using financial professionals to help you tax plan

Navigating tax deductions, credits, and filing statuses can be complex. A Northwestern Mutual financial advisor or tax professional can help you learn about taxes and how different approaches can affect your larger financial plan.

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About Northwestern Mutual

Northwestern Mutual has been helping people and businesses achieve financial security for more than 165 years. Through a holistic planning approach, Northwestern Mutual combines the expertise of its financial professionals with a personalized digital experience and industry-leading products to help its clients plan for what’s most important. With over $627 billion of total assets being managed across the company’s institutional portfolio¹ as well as retail investment client portfolios, more than $36 billion in revenues, and $2.3 trillion worth of life insurance protection in force, Northwestern Mutual delivers financial security to more than five million people with life, disability income and long-term care insurance, annuities, and brokerage and advisory services. Northwestern Mutual ranked 111 on the 2023 FORTUNE 500 and was recognized by FORTUNE® as one of the “World’s Most Admired” life insurance companies in 2024.

Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company (NM), Milwaukee, WI (life and disability insurance, annuities, and life insurance with long-term care benefits) and its subsidiaries. Subsidiaries include Northwestern Mutual Investment Services, LLC (NMIS) (investment brokerage services), broker-dealer, registered investment adviser, member FINRA and SIPC; the Northwestern Mutual Wealth Management Company® (NMWMC) (investment advisory and services), federal savings bank; and Northwestern Long Term Care Insurance Company (NLTC) (long-term care insurance). Not all Northwestern Mutual representatives are advisors. Only those representatives with “Advisor” in their title or who otherwise disclose their status as an advisor of NMWMC are credentialed as NMWMC representatives to provide investment advisory services.

This is not intended as legal or tax advice. Consult with a tax professional for tax advice that is specific to your situation.

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