Maximize Your Tax Refund: Individual Planning Edition

Did you know the average refund tops $3,000? That’s great news for some, but for others, it means they gave the IRS an interest-free loan all year. Most people think of their tax refund as a surprise bonus — something to look forward to every spring. However, in reality, your refund is essentially the government reimbursing you for money you have already earned. Instead of hoping for a big check (or dreading a bill), you can use smart planning throughout the year to make sure tax season works in your favor.

This post is part two of our refund planning series. Last time, we looked at deductions and credits you can use at filing time. Today, we’ll zoom out to the bigger picture: the year-round planning moves to target those deductions and credits that help maximize your refund — without giving the government an interest-free loan.

Why Planning Matters

Tax refunds aren’t free money — they’re the result of your withholdings, credits, and deductions. Without planning, you may be leaving money on the table or giving the government too much upfront. Proactive planning ensures smoother cash flow, fewer surprises, and more control over your financial picture.

Step 1: Fine-Tune Your Withholding

If you regularly get a $3,000–$4,000 refund, that’s a sign you’re over-withholding. Adjusting your W-4 means you keep more of your money in your paycheck during the year while still aiming for a small refund (or balance due).

Pro Tip: Use the IRS Withholding Estimator to check your status and tweak your payroll setup.

Step 2: Plan Around Major Life Events

Marriage, divorce, kids, a new house, or a side hustle all affect your taxes. Updating your W-4 or estimated tax payments at the time of the change prevents a nasty surprise at filing season. Your W-4 can be updated at any point; just ask your employer for a new form.

Step 3: Boost Tax-Advantaged Accounts

Refund planning is easier when you use accounts that lower taxable income, if your employer offers them:

401(k) or 403(b): Pre-tax contributions lower your income while saving for retirement.
Traditional IRA: Deductible for many taxpayers depending on income.
HSA (Health Savings Account): Triple tax benefit — deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.

A quick note before you decide to use one of these accounts. Deciding whether to do a traditional 401(k), 403(b), or IRA versus a Roth 401(k), 403(b), or IRA depends on what you value most. Do you value the deduction up front right away, or would you rather pull from retirement accounts tax-free?

Traditional retirement accounts – deduction upfront, tax when you withdraw. Best if you expect a lower tax rate in retirement
Roth retirement accounts – No deduction now, but tax-free when you withdraw. Best if you expect your retirement tax rate to be the same or higher.

Retirement accounts can cause a lot of confusion, so if you need more informatio,n I recommend you research it some more or talk to a tax or financial expert to get a clear understanding before choosing one or the other.

Step 4: Time Deductions and Income

If you’re close to the standard deduction threshold, “bunching” expenses into one year can maximize itemizing. For example, if you have the funds available, stack charitable donations, property taxes, mortgage interest, or medical expenses into a single tax year to tip the scale in your favor.

Additionally, for the teachers out there, track your out-of-pocket educator expenses, as these can be deducted up to $500. Also, for all the former students out there, track student loan interest paid–usually you’ll receive this on form 1098-E–but if not, make sure to track it.

Self-employed? Consider whether accelerating expenses or deferring income helps smooth your liability.

Step 5: Look for Credit Opportunities

Take advantage of the credits that are available based on your circumstances:

Child and dependent care credit: Credit for qualifying child care expenses provided by a day-care
American Opportunity Tax Credit (AOTC) and Lifetime Learning Credit (LTLC): If you are in college or have children in college, look out for a 1098-T from your school or track these expenses yourself so you can get in on the AOTC and LTLC.
Energy efficiency improvements credit: With this credit phasing out almost entirely, this may be the last year to take advantage of the credit. Track expenses that improve the energy efficiency of your house, such as insulating, replacing exterior windows and doors, or installing skylights

Step 6: Stay Organized Year-Round

In the last post, we talked about tracking expenses and deductions. Here’s the upgrade: systematize it.

Use an app or spreadsheet to log donations, medical expenses, student loan interest, educator expenses, tuition costs, energy efficiency improvements, and day care expenses as they happen.
Store tax documents in a cloud folder so you’re not scrambling in March.
Automate savings into a “tax fund” if you make estimated payments.

Being organized reduces missed deductions and makes filing smoother, not to mention your accountant will thank you.

Step 7: Don’t Forget State Taxes

Many people forget that state tax rules differ. Some states allow deductions or credits that the federal return doesn’t, and planning for them can make a meaningful difference to your refund.

Examples: deductions for 529 plan contributions, renters’ credits, or state-specific solar/energy credits.

Each state has different allowable items for deductions and credits, so talk with your local tax professional to see what state tax items you can take advantage of.

Step 8: Adjust Quarterly Payments for Side Income

If you freelance, consult, or side hustle, underpayment penalties can eat into your refund. Adjusting quarterly estimated payments to better reflect your income protects your refund and keeps you penalty-free.

Example Scenarios

The Over-Withholder: Josh consistently gets $4,200 back each year. After adjusting his W-4, he increases his take-home by $350/month — money he redirects into his IRA, still aiming for a modest refund. Josh’s new plan is ideal–he avoids lifestyle creep by contributing to his IRA.
The New Parent: Maria and Luis welcome a baby in August. By updating their W-4 immediately, they capture the Child Tax Credit early instead of waiting until filing.
The Freelancer: Alex earns extra income through design gigs. By setting aside 25% for quarterly payments, he avoids a surprise bill and penalty, while still claiming deductions for home office and equipment.

What Should You Do Next?

Double-check your W-4 withholdings are still accurate or at a level that you feel comfortable with.
If you aren’t already contributing to a 401(k), IRA, or HSA, consider contributing–you have until April next year to make a final contribution to all these accounts.
Organize your records and decide if it will be beneficial to accelerate or slow down itemized deductions to position yourself well for this year or next year, and if any of your expenses may qualify for tax credits.
See if there are any state credits or deductions you could try to take advantage of.

Final Thoughts

Refund maximization isn’t about crossing your fingers in April — it’s about making intentional moves all year. Adjust your withholding, plan around life changes, leverage tax-advantaged accounts, and keep organized.

Remember: the average refund may be $3,000, but planning ahead can make that number work smarter for you–whether it’s bigger, smaller, or just right.

– Brendan Tiedeman, CPA