Is it possible to get a bigger refund than you pay in taxes?

[sarahann77]

Real estate mortgage interest might help. Someone close pretty much only gets a refund due to that credit deduction.

 

[wvjules]

Real estate mortgage interest isn't a refundable credit. It doesn't make you get back more than you paid in. Only refundable credits can do that.

 

[pryncess527]

https://www.irs.com/articles/refundable-vs-non-refundable-tax-credits

That explains some of the most common refundable tax credits.

The person I know who gets the largest, gets the Small Business Health Care Tax Credit.
Most other people I know who get large returns aren't actually getting any credits, other than maybe EITC, they just have high withholdings. A lot of people don't really seem to understand the relationship between their monthly withholdings and their annual tax bill . . .

 

[tzolkin]

Not an answer to the OP's question, but related to the comment that some get "huge" refunds...

I think some people don't understand that the amount someone is getting in a refund does not always directly correlate to how much (or little) they pay in taxes.

For example, let's say you and I have the exact same financial situation (same pay, same dependents, same deductions).
I had $5000 withheld from my paycheck and that's the correct amount I should have been taxed. I would wind up with a $0 refund.
You had $15,000 withheld from your paycheck and wind up with a $10,000 refund.

That does not mean that you're paying any less in taxes or getting more "free money" than I am. We still both paid $5,000 in taxes and have the same total income.

 

[AndyLL]

It amazes me how much in taxes we pay in and it drives me crazy when people boast how much they are getting back in a return.
We are both working long hard hours, so we both have a lot of over time and we are really saving now for our retirement, which is in 15 years.
This year, we both paid into the Federal government, $32,000. Our state we paid in $15,000, I think SS and Medicare was around $20,000. Over 1/2 of our paychecks go into taxes. There is something seriously wrong with our tax system. We are receiving a refund of $4,000, between our state and Federal returns, big deal, look at how much we have paid in.

You make under 134,000 net and pay 67,000 in taxes?

$20,000 in payroll taxes on 134,000 net?

 

[dish rag]

I've always wondered this because I know people who get huge refunds.

Sadly, yes.

 

[runwad]

Yep I have a negative tax rate this year because I have two in college and qualify for the full AOTC x 2. Before I had kids in college I put as much as I could in my 401k to bring my taxable income down and adjusted my with holdings so I'd either get very little back or owe very little.

The credits we get back this year will be going towards the kids tuition next fall, so in essence I'm still at getting 0 back in my mind. That's good tax planning!

 

[Skippy918]

Owning a business also helps get most of the money back that you paid in. Between depreciation and carry forward losses, people can get most of their money back.

 

[mnrose]

You make under 134,000 net and pay 67,000 in taxes?

$20,000 in payroll taxes on 134,000 net?

Yes, something isn't adding up here. On 134000 you'd owe less than $20K in federal income tax, and that assumes only the standard (non-itemized) deduction...and with only two exemptions (i.e., no kids). And, payroll taxes on that amount would be around 7.65%, which is around 10K. To reach 20,000 in payroll taxes, you'd need to have income in excess of 261000. (Which might also explain the claim of 32000 in federal income taxes). But, that would mean the 67K would be more like 25%, not 50%.

One year, I DID pay in excess of 50% in combined taxes, but that was the year I had a golden parachute and got hit with some excess taxes because of that. I made a very hefty salary in most years, but never got close to 50%, except that one year.

 

[DLgal]

It amazes me how much in taxes we pay in and it drives me crazy when people boast how much they are getting back in a return.
We are both working long hard hours, so we both have a lot of over time and we are really saving now for our retirement, which is in 15 years.
This year, we both paid into the Federal government, $32,000. Our state we paid in $15,000, I think SS and Medicare was around $20,000. Over 1/2 of our paychecks go into taxes. There is something seriously wrong with our tax system. We are receiving a refund of $4,000, between our state and Federal returns, big deal, look at how much we have paid in.

You are either over exaggerating your taxes paid or under reporting your actual income.

When people who make a ton of money complain about paying a lot in taxes, I have very little sympathy. If you are paying THAT much as you claim in taxes, you are doing VERY well for yourselves.

 

[Cannot_Wait_4Disney]

In most cases, though, anyone could make it so they get a "huge" refund. Simply withhold more from paychecks during the year and you'd get a lot of it back with your tax return.

But all that really means is that money that you could have had during the year was held onto by the IRS and then given back at the end of the year.

EITC and other refundable credits is a different story, however - as they don't have anything to do with withholdings.

Those that get huge amounts back are essentially giving the U.S. government an interest free loan. Why would anyone want to do that?

 

[Mackenzie Click-Mickelson]

It amazes me how much in taxes we pay in and it drives me crazy when people boast how much they are getting back in a return.
We are both working long hard hours, so we both have a lot of over time and we are really saving now for our retirement, which is in 15 years.
This year, we both paid into the Federal government, $32,000. Our state we paid in $15,000, I think SS and Medicare was around $20,000. Over 1/2 of our paychecks go into taxes. There is something seriously wrong with our tax system. We are receiving a refund of $4,000, between our state and Federal returns, big deal, look at how much we have paid in.

While I do get where you are coming from it is all relative right?

That seems like quite a bit of taxes coming out so perhaps you are in a relatively high income bracket?

I do think that the current tax system has kinks in there though.

 

[dish rag]

Those that get huge amounts back are essentially giving the U.S. government an interest free loan. Why would anyone want to do that?

Because they don't know any better or understand money.

 

[Mackenzie Click-Mickelson]

Those that get huge amounts back are essentially giving the U.S. government an interest free loan. Why would anyone want to do that?

But as we've already found out "huge" is in the eye of the beholder right?

 

[MillauFr]

Those that get huge amounts back are essentially giving the U.S. government an interest free loan. Why would anyone want to do that?

It is pretty risky too. If congress defunded the IRS it could delay your refund indefinitely.

 

[Cannot_Wait_4Disney]

It is pretty risky too. If congress defunded the IRS it could delay your refund indefinitely.

Or if there is a general shut down too. Some people do it thinking they aren't going to save otherwise and like to vacation on that big IRS check.

 

[dish rag]

You are either over exaggerating your taxes paid or under reporting your actual income.

When people who make a ton of money complain about paying a lot in taxes, I have very little sympathy. If you are paying THAT much as you claim in taxes, you are doing VERY well for yourselves.

Few people want to pay a lot in taxes especially when they see people getting thousands back in taxes when they paid nothing in. My wife paid close to $40,000 in income tax in Canada last year and it was on unearned income. Something not right about that either.

 

[Gumbo4x4]

You make under 134,000 net and pay 67,000 in taxes?

$20,000 in payroll taxes on 134,000 net?

I think it's the way it's worded. The amount they pay in taxes is equal to 50% of their takehome pay. Assuming no other payroll deductions (which probably is NOT the case), that would be 1/3 their gross as taxes.

At least, I think that's what they're saying.

 

[Imnatari]

I haven't gotten a tax return since I was in college

 

[MillauFr]

I have no problem when poor people claim the earned income credit and pay no taxes. I still think it is wrong that rich pay nothing. You know they are help write the tax code so they can evade paying their fair share.