How to Get The Maximum Tax Refund in 2024-2025

Every tax season, American taxpayers hope to minimize their individual income tax burden. Understanding the latest tax policies, available tax deductions and credits, and engaging in sound tax planning are crucial for reducing overall tax liability. This article aims to provide a practical guide for ordinary American taxpayers, outlining how to effectively reduce individual income tax while complying with tax laws.

I. Understanding Your Tax Obligations and the Importance of Planning

In the United States, most U.S. citizens or permanent residents working in the U.S. need to file a tax return. However, whether you need to file and the specific requirements depend on various factors, including your gross income, filing status, and age. For instance, for single taxpayers under 65 at the end of 2024, if their gross income reaches or exceeds $14,600, they generally need to file an income tax return. Different filing statuses and age groups have different income thresholds. Even if your income is below the filing threshold, you might still need to file if you had over $400 in net earnings from self-employment or other specific situations apply. Furthermore, even if you don’t meet the filing requirements, it can be beneficial to file if you had federal income tax withheld or qualify for certain refundable tax credits, as you might receive a refund.  

Tax planning shouldn’t be limited to the annual tax season. Planning ahead can help taxpayers better understand their potential tax bracket and develop strategies to lower their taxable income. Reviewing your tax situation at the end of the year can also help identify last-minute opportunities to reduce your tax bill, such as increasing pre-tax 401(k) contributions.  

II. Key Changes in US Tax Policy for 2025

Staying informed about the latest tax policy changes is essential for effectively reducing your tax liability. The Internal Revenue Service (IRS) annually adjusts over 60 tax provisions for inflation, including income tax rate brackets, standard deduction amounts, and other related figures. These adjustments aim to keep the tax system aligned with changes in the cost of living. Generally, the adjustments for the 2025 tax year (returns filed in 2026) will increase by about 2.8%.  

A significant change for 2025 is the increase in the standard deduction. For single taxpayers and those married filing separately, the standard deduction rises to $15,000, an increase of $400 from 2024. For married couples filing jointly, the standard deduction increases to $30,000, up $800 from 2024. For those filing as head of household, the standard deduction will be $22,500, a $600 increase from 2024. It’s important to note that the personal exemption remains at $0 for the 2025 tax year , a part of the Tax Cuts and Jobs Act (TCJA) of 2017.  

The income tax rate brackets have also been adjusted for inflation in 2025. There are still seven federal income tax rates: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The top marginal tax rate of 37% applies to individual taxable income over $626,350 ($751,600 for married couples filing jointly). The income ranges for the other tax rates have also been adjusted accordingly. Understanding these tax brackets helps taxpayers estimate their tax liability and plan how to potentially adjust their income to fall into a lower tax bracket.  

The Alternative Minimum Tax (AMT) exemption amounts and phase-out thresholds have also increased. For the 2025 tax year, the exemption amount for unmarried individuals increases to $88,100 ($68,650 for married individuals filing separately) and begins to phase out at $626,350. For married couples filing jointly, the exemption amount rises to $137,000 and begins to phase out at $1,252,700. The AMT is designed to ensure that high-income taxpayers pay a minimum level of tax, even if they have numerous deductions and exemptions.  

Retirement plan contribution limits have also been adjusted. For 2025, the annual contribution limit for traditional and Roth IRAs remains at $7,000, with an additional catch-up contribution limit of $1,000 for individuals aged 50 and over. For employees participating in 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan, the annual contribution limit increases to $23,500. The catch-up contribution limit generally applicable to employees aged 50 and over remains at $7,500 , so participants 50 and over can generally contribute up to $31,000 annually starting in 2025. Due to a provision of the Secure 2.0 Act, a higher catch-up contribution limit applies for employees ages 60, 61, 62, and 63, which is $11,250. The contribution limit for a simplified employee pension (SEP) IRA in 2025 is $70,000 or 25% of the employee’s compensation, whichever is lower, up from $69,000 in 2024. The contribution limit for a SIMPLE IRA increases to $16,500 in 2025, up from $16,000 in 2024. Individuals aged 50 and over can make an additional catch-up contribution of $3,500.  

The employee salary reduction limit for health flexible spending accounts (Health FSA) also increases to $3,300 in 2025, up from $3,200 in 2024. For plans that permit the carryover of unused amounts, the maximum carryover amount rises to $660, increasing from $640 in 2024.  

Health Savings Account (HSA) contribution limits have also increased for 2025. For those with self-only coverage, the annual deductible must not be less than $2,850 but not more than $4,300. The maximum out-of-pocket expense limit increases to $5,700. For family coverage, the annual deductible must not be less than $5,700 but not more than $8,550. The out-of-pocket expense limit for family coverage in 2025 is $10,500. Couples aged 55 and over with their own HSAs can each make an additional catch-up contribution of $1,000, potentially bringing their maximum total contribution to $10,550.  

Other important adjustments include: the monthly limit for qualified transportation fringe benefits increasing to $325 ; the foreign earned income exclusion rising to $130,000 ; the basic exclusion amount for estate tax increasing to $13,990,000 ; the annual gift tax exclusion increasing to $19,000 ; and the maximum amount for the adoption credit increasing to $17,280.

III. Utilizing Tax Credits to Directly Lower Your Tax Bill

Tax credits are amounts that directly reduce the amount of tax you owe. A dollar-for-dollar reduction makes them generally more valuable than tax deductions. Taxpayers should carefully review their eligibility for any tax credits to maximize their tax savings.  

Here are some common tax credits:

• Earned Income Tax Credit (EITC): This is a refundable tax credit for low- to moderate-income taxpayers. Depending on filing status and the number of children, eligible taxpayers could receive a maximum credit of $8,046 when filing in 2025. You may qualify even if you don’t have children. Generally, the higher your income, the higher your potential credit amount. For the 2025 tax year, taxpayers with investment income exceeding $11,950 will not be eligible for the EITC.  
• Child Tax Credit (CTC): This credit provides a tax benefit for children under the age of 17. For the 2025 tax year, the maximum credit amount is $2,000 per qualifying child, with up to $1,700 potentially refundable. To qualify, taxpayers must meet certain income requirements.  
• Child and Dependent Care Credit (CDCC): This credit helps offset the cost of daycare and similar expenses for children under 13, a spouse or parent incapable of self-care, or another dependent, allowing the taxpayer to work. Typically, you can claim up to 35% of $3,000 in expenses for one qualifying person or up to 35% of $6,000 for two or more qualifying persons.  
• American Opportunity Tax Credit (AOTC): This credit applies to the first four years of higher education, allowing taxpayers to claim 100% of the first $2,000 spent on tuition, books, equipment, and fees, plus 25% of the next $2,000, for a maximum total credit of $2,500. Up to $1,000 of the credit may be refundable.  
• Lifetime Learning Credit (LLC): This credit allows taxpayers to claim 20% of the first $10,000 paid for tuition and fees, up to a maximum of $2,000. Similar to the AOTC, the LLC does not include living expenses or transportation but can include books or supplies required for coursework. To claim the full credit, single filers must have an income of $200,000 or less, and those filing jointly must have an income of $400,000 or less.  
• Adoption Credit: This credit helps taxpayers with eligible adoption expenses. For the 2025 tax year, the maximum credit is $17,280, but it phases out as income increases, being completely eliminated when modified adjusted gross income (MAGI) reaches or exceeds $299,190. This credit is nonrefundable.  
• Retirement Savings Contributions Credit (Saver’s Credit): This credit is for low- to moderate-income taxpayers who contribute to retirement accounts. The credit amount depends on adjusted gross income and the amount contributed, with a maximum credit of $1,000 (single filers) or $2,000 (joint filers).  
• Clean Energy and Vehicle Credits: These include credits for purchasing qualifying electric vehicles or making certain home energy improvements.  

Taxpayers should carefully review their eligibility for these and other less common tax credits. For example, there are also credits for those who paid taxes overseas, overpaid Social Security or RRTA tax, and paid alternative minimum tax in prior years.  

2025 Federal Income Tax Rate Brackets

IV. Utilizing Tax Deductions to Lower Your Taxable Income

Tax deductions are specific expenses that can be subtracted from your gross income, reducing your taxable income. Lowering your taxable income directly reduces your tax liability. Taxpayers can choose to take the standard deduction or to itemize their deductions. If the total of your deductible expenses exceeds the standard deduction for your filing status, itemizing is generally more beneficial.  

Here are some common tax deductions:

• Retirement Account Contributions: Contributions to certain retirement accounts can lower your taxable income for the year. For example, contributions to a traditional 401(k) plan are typically pre-tax, directly reducing your taxable income. Contributions to a traditional IRA may also be tax-deductible under certain conditions. While Roth IRA contributions are made after tax, qualified distributions in retirement are tax-free.  
• Health Savings Account (HSA) Contributions: Pre-tax contributions to an HSA can also reduce your taxable income. You can make HSA contributions until the tax deadline and apply the deduction to the previous tax year.  
• Student Loan Interest Deduction: Borrowers can deduct up to $2,500 in student loan interest paid during the year. You don’t need to itemize to take this deduction.  
• Self-Employment Health Insurance Deduction: If you are self-employed, you can typically deduct the premiums you paid for health insurance for yourself, your spouse, and your dependents, further reducing your taxable income.  
• Home Office Deduction: If part of your home is used regularly and exclusively for business, you may be able to deduct related home office expenses, such as rent, utilities, and real estate taxes.  
• Charitable Donations Deduction: Donations to qualified charitable organizations can provide tax savings. This includes cash donations, household items, appreciated stocks, and even certain volunteer expenses, such as the cost of ingredients for a donated dish or mileage driven for volunteer work. You generally need to itemize deductions to claim charitable contributions.  
• Medical Expenses Deduction: Generally, you can deduct qualified, unreimbursed medical expenses that exceed 7.5% of your adjusted gross income. This deduction is also claimed when itemizing.  
• State and Local Tax (SALT) Deduction: You can deduct up to $10,000 ($5,000 if married filing separately) for the total of property taxes and either state and local income taxes or sales taxes. This deduction is also an itemized deduction.  
• Investment Losses Deduction: Selling investments at a loss (known as “loss harvesting”) can offset capital gains taxes and reduce your overall tax liability. If your losses exceed your gains, you can use up to $3,000 of the excess loss to offset ordinary income. Any remaining losses can be carried forward to future tax years. However, be aware of the “wash sale” rule, which disallows losses if you repurchase the same or a substantially similar investment within 30 days before or after the sale.  
• Other common itemized deductions include home mortgage interest , gambling losses (up to the amount of winnings) , and certain casualty and theft losses.  

2025 Earned Income Tax Credit (EITC) Parameters

V. Setting Up a College Savings Fund for Your Children

While contributions to a 529 plan are not directly tax-deductible at the federal level, the earnings grow tax-free, and distributions for qualified educational expenses are also tax-free. Some states also offer state tax deductions for contributions to 529 plans. In 2025, individuals can use up to $10,000 per year per student for tuition and other qualified expenses for K-12 grades. Additionally, in 2025, individuals can contribute up to $19,000 (or $38,000 for married couples filing jointly) to any number of beneficiaries without it being considered a taxable gift.  

VI. Tax Planning for the Self-Employed

Self-employed individuals can typically deduct a wide variety of business expenses, such as office rent, home office expenses, vehicle costs, and inventory. Lowering net profit through these deductions can reduce both income tax and self-employment tax. Self-employed individuals can also deduct a portion of their self-employment tax on their individual income tax return. Additionally, considering your business entity structure may offer tax advantages.  

VII. Year-Round Tax Planning Strategies

Tax planning should not be limited to tax season. Planning throughout the year can help you take advantage of opportunities to lower your tax liability.  

• Understand Your Tax Bracket: Having a clear understanding of your current federal income tax bracket is essential for effective planning for the future. The U.S. has a progressive tax system with seven tax brackets. Your highest tax rate depends on your taxable income.  
• Know the Difference Between Tax Deductions and Tax Credits: Both tax deductions and tax credits reduce your tax bill, but they work differently. Tax deductions are specific expenses you can subtract from your taxable income, reducing the amount of your income that is subject to taxes. Tax credits are even more beneficial as they provide a dollar-for-dollar reduction in your tax bill.  
• Decide Whether to Take the Standard Deduction or Itemize: This decision can significantly impact your tax bill. The standard deduction is a flat-dollar amount that depends on your filing status. Alternatively, you can itemize by listing all the individual tax deductions you qualify for. Generally, people itemize if their total itemized deductions exceed the standard deduction.  
• Keep an Eye on Popular Tax Deductions and Credits: Numerous deductions and credits are available, each with specific eligibility rules. It’s important to research and understand the requirements for these potential tax breaks.  
• Know What Tax Records to Keep: Maintaining tax returns and supporting documents is crucial, especially in case of an audit. Generally, the IRS has three years to audit your return, so keep records for at least that long.  
• Tweak Your W-4: Your W-4 form tells your employer how much tax to withhold from your paycheck. You can use this to your advantage for tax planning. If you received a large tax bill when filing, increasing your withholding might help you owe less next time. Conversely, if you received a large refund, you might want to reduce your withholding to have more money in your paycheck throughout the year. You can adjust your W-4 at any time.  
• Utilize Tax Strategies to Shelter Income or Cut Your Tax Bill: Beyond deductions and credits, several other strategies can help reduce your tax liability. These include maximizing contributions to retirement plans , considering Roth IRA conversions , utilizing tax-efficient investing , and considering setting up charitable trusts.  
• Consider Tax-Loss Harvesting: If you have investment losses, you might be able to use a strategy called tax-loss harvesting. This involves selling investments at a loss to offset capital gains taxes from other investments, potentially reducing your overall tax burden.  
• If You’re Older Than 70.5 Years, Consider a Qualified Charitable Distribution (QCD): Individuals aged 70.5 or older can make a qualified charitable distribution (QCD) of up to $100,000 directly from an IRA to a qualified charity. This can prevent the IRA distribution from impacting your adjusted gross income (AGI) and can count towards your required minimum distribution (RMD).  
• If You’re Itemizing, Maximize Your Deductions: If itemizing deductions will be more beneficial than taking the standard deduction, take steps to maximize those deductions. Consider “bunching” itemizable deductions like medical expenses or charitable donations into a single year to potentially exceed the standard deduction threshold.  
• Review Opportunities to Leverage Available Tax Credits: Regularly review potential tax credits as they directly reduce your tax liability. For example, the Inflation Reduction Act offers credits for purchasing qualified electric vehicles or making certain home energy improvements.  

VIII. Seeking Professional Tax Advice

Given the complexity of tax laws, it’s often wise to seek help from a professional tax advisor or a Certified Public Accountant (CPA). They can provide personalized advice, ensure you understand all applicable tax policies, deductions, and credits, and help you develop the most effective tax planning strategies to legally reduce your individual income tax.  

By understanding the U.S. tax system, staying informed about the latest policy changes, and proactively engaging in tax planning, American taxpayers can effectively reduce their individual income tax burden. Utilizing available tax credits and deductions, and considering year-round tax planning strategies, will help you minimize your tax liability while complying with the law.

Summary of Key 2025 Tax Changes and Contribution Limits

Citation Sources：

• (https://turbotax.intuit.com/tax-tips/tax-deductions-and-credits/7-best-tips-to-lower-your-tax-bill-from-turbotax-tax-experts/L0frRUUVL)
• https://www.ameriprise.com/financial-goals-priorities/taxes/ways-to-lower-taxes#plan-throughout
• https://www.irs.gov/individuals/check-if-you-need-to-file-a-tax-return
• (https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2025#:~:text=Standard%20deductions.,%24800%20from%20tax%20year%202024.)