It’s that time of the year when many taxpayers think about paying their taxes to get their tax refund.
Last year, nearly 75% of taxpayers received tax refunds, and the average direct tax return was nearly $3,000 during the last tax season.
Now you may be wondering if there are any new tax benefits that will help mitigate the impact in 2020. Whether you’ve received a tax refund, are thinking about getting back more than you did last year, or were affected by the events in 2020, here are two tips to help you maximize your tax refund this year.
- Take advantage of the tax benefits provided by coronavirus relief measures.
- Contribute to your retirement to get multiple benefits.
Take Advantage of the Tax Benefits Provided by Coronavirus Relief Measures
2020 is an event that affected virtually everyone’s lives one way or another, and it may have had fiscal implications for all of us.
The coronavirus support package we adopted in 2020 includes a series of relief measures, including expanded unemployment benefits, stimulus programs, and tax cuts for the middle class.
The recovery plan is not taxable under the relief package, but if you do not receive a full recovery payment, you may be able to claim more in the form of a refund discount on your tax return. This discount can increase or decrease the refund you have to pay, or even make you pay too much.
The CARES Act also includes a provision that allows taxpayers who claim the standard deduction to claim up to $1,000 in additional tax credits, such as the Earned Income Tax Credit.
One thing to note: if you are self-employed, receive extended unemployment benefits as a result of termination or insolvency, are sick or quarantined, and care for a family member, there is a new tax credit known as the Families First Coronavirus Response Act, which qualifies you for family leave health benefits. Unemployment income is taxable, but you can claim income based on deductions you did not have before. If you make a coronavirus-related withdrawal from your pension account under the CARES Act, you can forgo early withdrawals before the age of 59.If the distribution is included in your income until 2020, it will not be added to your taxable income.