Most people see doing taxes as one of the necessary chores all adults have to tackle on an annual basis. However, there are plenty of reasons why tax season is a good time of year. In honor of Valentine’s Day, here are some of the reasons you should love tax time.
1: Your Refund!
The best thing about tax season is getting a refund. According to the IRS, about 83 percent of taxpayers got a refund in 2015. Better yet, the average refund in 2015 was a whopping $2815.
If you’ve overpaid on your taxes throughout the year or are eligible for certain tax credits, you may qualify for a refund. This is extra money you can stow away for a rainy day, or you can use it to take a vacation or buy that big-screen TV you’ve been eyeing. You can even check the status of your refund here.
2: E-Filing and Direct Deposit Mean a Faster Refund
The IRS has taken a number of measures to ensure taxpayers get their refunds as quickly as possible. With e-filing and direct deposit, taxpayers can expect to get their refunds within 21 days of the IRS’ approving their tax return. This is despite the fact that they process close to 50 million returns.
The one exception is if you’re claiming the Earned Income Tax Credit (EITC) and/or the Additional Child Tax Credit (ACTC). Any taxpayers who claim either of these credits will not receive their refunds until February 15 or later, regardless of when they filed their taxes. However, that’s still close to Valentine’s Day.
3: Refundable Tax Credits
There are a number of tax credits available to taxpayers for a number of reasons. These include the number of children or dependents, whether the taxpayer is a business owner, or if they’re enrolled in a degree program. Tax credits lower the amount of tax you owe based on your income. They’re different than tax deductions, which reduce your taxable income. Tax credits fall into two categories: refundable and non-refundable.
Non-refundable tax credits can lower the amount of tax you owe to zero, but no further. On the other hand, refundable tax credits can lower your tax liability to zero. And if the total credit is more than what you owe, you get a refund for the difference.
Here are some examples of refundable tax credits. If applying these tax credits brings your tax liability to below zero, you get a refund for that amount.
- Additional Child Tax Credit — allows taxpayers who have claimed the non-refundable Child Tax Credit (see below) to receive a refund
- Earned Income Tax Credit — for low- to moderate-income earners, especially those with children
- Health Coverage Tax Credit — credit for health insurance premium costs
- Small Business Health Care Tax Credit — credit for small businesses who provide health insurance to their employees
4: Non-Refundable Tax Credits
In contrast, here are some tax credits that are non-refundable. Although these credits won’t necessarily earn you a refund, they can help lower your total tax burden and reduce the amount you owe. These credits can reduce your tax liability to zero, but no further.
- Adoption Tax Credit — helps pay for the costs to adopt a child
- Child Tax Credit — helps taxpayers pay for costs associated with providing for a child
- Foreign Tax Credit — tax credit for taxes owed in a foreign country
- Mortgage Interest Tax Credit — credit for interest paid as part of a mortgage on a qualifying home
There are lots of reasons to appreciate tax season, especially around Valentine’s Day. By taking advantage of the tax credits you qualify for and using e-file and direct deposit, you’ll be able to pay for your own personal version of the perfect Valentine’s Day for yourself and your loved ones.