To understand how much you get back in taxes, you need a quick lesson in withholdings.
Now you’ve probably noticed that a large portion of your income is “missing” from your paycheck each month. Part of the reason it’s missing (aside from 401ks, insurance, etc.) is because the government is “withholding” your pay based on how you filled out IRS form W4. This form determines how much you and your employer agree to withhold for taxes.
To get a rough estimate of how much you’ll get back, then, you need to:
- Find your total income tax owed for the year (I suggest using this tax calculator for a rough estimate).
- See if that’s more or less than what you’ve had withheld (look on your end-of-year W2 form).
This is a very simple breakdown of how tax refunds are calculated and doesn’t take into account things like tax deductions, exemptions, and benefits claimed throughout the year. But it can give you a rough idea of how much you might get back from the IRS come tax season.
Let’s take a look at this using two more VERY simplistic examples.
Tax Refund Calculator: How much will John ($75,000 / No kids) get back in taxes?
John is a single 30-year-old with no dependents. Last year, he made $75,000, withheld $15,000, and collected no government benefits.
Check out how much he could get for his 2017 tax refunds (using the calculator above).
Subtract the red circle from the blue for the refund.
$3,105. Just about the average for tax refunds! AND with the new tax laws, he stands to get even more in his refunds in 2019 (about $5,195).
How about someone who’s married with children?
Tax Refund Calculator: How much will Margaret (45 / $100,000 / 3 kids) get back in taxes?
Margaret is a married 45-year-old with three kids under the age of 17. Last year, she made $100,000 and withheld $30,000 in taxes. She’s ALSO the head of her household and collected no government benefits.
How much does she stand to get back?
Subtract the red circle from the blue for the refund.
Uncle Sam might owe Margaret $14,465 when all is said and done. And if her situation doesn’t change in 2021, her refund will actually grow to $20,584.
NOTE: Everyone’s tax situation is unique and any online tax refund calculator will, at best, provide you with a rough estimate of how much you’ll get back. The two examples above are incredibly simple and don’t fully capture the nuances of someone’s actual financial situation.
Play around with them and be as specific as you can. The more details you can provide the better of an idea you’ll have of what you’ll receive for your refund.
So now you know roughly how much you’ll be getting back and you’re ready to collect the money Uncle Sam owes you. (Or, if you didn’t withhold enough, how much you owe.)
Before you hoist your “Don’t tread on me” flag and march down to the IRS building to get your money, you should know about all the ways you can get your tax refund.
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