Curious About Tax Strategies? Here’s the Average Tax Refund

If you overpay the IRS in taxes during the year, they’ll typically return your money in the form of a tax refund. And the IRS refunds taxpayers to the tune of billions of dollars every year.

For the 2025 tax filing season, the IRS refunded more than $311 billion to taxpayers as of October 17. The average refund amount was $3,052.

While getting a lump sum of money from the IRS after you file your taxes may seem like a pleasant surprise, it’s actually better to avoid overpaying taxes, as you’re essentially extending the federal government an interest-free loan.

So if you want to keep more money in your wallet and give less to Uncle Sam, here are three tips to save on taxes.

Contribute To Tax-Advantaged Accounts

Contributions to a traditional 401(k) and some types of contributions to individual retirement accounts (IRAs) are tax-deductible in the year you make them.

Say you contribute $50 out of each of your paychecks to your 401(k) over the course of the year. Your employer subtracts this money from your pay before it calculates tax withholding on the balance. You’ve put away $2,600 toward your golden years, and every one of those dollars was tax-free … for now.

However, you will have to pay taxes on this money when you begin withdrawing it in retirement. These rules apply to traditional retirement accounts though.

Roth accounts are different though. With Roth accounts, you’ll pay taxes on your upfront contributions but won’t have to pay taxes when you take withdrawals in retirement.

And depending on your income and whether you have a workplace retirement plan, you may be able to deduct your traditional IRA contributions from your income.

Reducing your income could even pull you down into a lower income tax bracket, so you could pay a lower marginal tax rate on your income.

Another way to reduce your taxable income is by contributing to your health savings account (HSA). With HSAs, your contributions are tax-deductible, money can grow tax-free, and withdrawals are tax-free when used for qualified medical expenses. However, you must be enrolled in a high-deductible health plan to qualify.

See If You Qualify For Any Tax Credits

A tax credit is subtracted from the amount you owe the IRS when you complete your tax return. Say you owe $2,000, then you realize that you’re eligible to claim a $1,000 credit. Now you only owe the IRS $1,000.

The IRS offers numerous tax credits.

You may be eligible for the Child Tax Credit if you have a child under the age of 17 at the end of the tax year. It’s worth $2,200 per qualifying child in 2025, and there’s a refundable $1,700 portion if your tax bill hits zero before you use up the credit.

Another tax credit to potentially take advantage of is the American Opportunity Tax Credit, which can be used to save money on higher education expenses. The AOTC is $2,500 per eligible student, with a refundable portion of up to $1,000.

Choose Wisely Between Taking The Standard Deduction or Itemizing

Tax deductions are subtracted from your income to reduce your taxable income when you prepare your return.

You have two options here: you can claim the standard deduction for your filing status, or you can itemize by adding up all your tax-deductible expenditures for the year. Both subtract directly from your taxable income when you file your return, but you can’t claim the standard deduction and itemize, so it only makes sense to claim the amount that’s higher.

The 2025 standard deduction for single filers is $15,000 and $30,000 for married taxpayers who file jointly.

If you opt to itemize on the other hand, you can deduct expenses like state income or property taxes, mortgage interest, some medical expenses, and more.

And certain types of workers, such as those who receive part of their income as tips and those who receive overtime pay, may benefit from a recent federal tax law, known as the One Big Beautiful Bill Act, that was passed earlier this year.

“Legislation was passed on July 4, eliminating tax on certain tips and some overtime,” says Alison M. Eddings, certified public accountant at Top Dog Tax & Accounting. “But the amount that will be excluded from tax won’t be listed separately on your W-2. It will be up to you to figure that out. Plus, the no tax on overtime doesn’t mean your entire $22.50 an hour in overtime pay (based on a $15 rate) is excluded from tax. Only the increment is excluded, so the $7.50 increase in income will be excluded, and you have to track that carefully.”