7 Ways You Can Still Lower Your 2020 Taxes

Though this year's tax-filing season was delayed a bit, the IRS has officially begun accepting tax returns, which are due by April 15. If you're about to tackle your 2020 taxes, which are the ones due this year, you may be wondering what you can do to lower them. Here are a few ways to cut last year's tax bill -- and either owe the IRS less or score a higher refund.

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There are a number of lucrative tax credits you may be entitled to claim on your 2020 return, each of which will lower your tax burden for the year. If you're a lower-income household, it especially pays to see if you're eligible for the Earned Income Tax Credit (EITC). Even if you've never claimed it before, if your income took a hit during the pandemic, you may now be eligible.

ALSO READ: Tax Credits vs. Tax Deductions: What's the Difference and Which Is Better?

The more tax deductions you can claim for 2020, the lower your tax bill will be. Furthermore, there are certain deductions you can claim even if you don't itemize on your return, like student loan interest and educator expenses.

It's not too late to put more money into your 2020 IRA, and doing so could shrink your tax bill substantially. If you were under 50 last year, your annual contribution maxes out at $6,000. If you were 50 or older by the end of 2020, your annual contribution maxes out at $7,000. You have until April 15 -- the tax-filing deadline -- to finish contributing to last year's IRA.

Just as you can fund your 2020 IRA until April 15, so too can you do the same for last year's health savings account (HSA). If you had self-only coverage last year, your 2020 HSA contribution can total $3,550. If you had family-level coverage, that limit rises to $7,100. Plus, if you were 55 or older by the end of 2020, you can contribute another $1,000 on top of whichever limit applies to you.

ALSO READ: Are You Making the Most of Your HSA?

If you'll be itemizing on your 2020 taxes, it could pay to take a deeper dive into your medical spending. You're eligible for a deduction for medical expenses that exceed 7.5% of your adjusted gross income. If your income was reduced last year during the pandemic -- say, your hours were cut -- but your medical spending stayed the same, you may be able to claim a deduction for healthcare costs even if you've never gotten to in the past.

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If you were eligible for a stimulus check last year based on your income but never got one, you can still claim that money via the Recovery Rebate Credit. If you owe the IRS, that credit will be used to offset your bill so you pay less tax for 2020. And if the IRS owes you money, you'll add to your refund by claiming your stimulus.

If you took a withdrawal from your retirement plan under the CARES Act but your financial situation has since improved, returning those funds could work to your benefit tax-wise. Though penalties on early withdrawals were waived for those impacted by the pandemic, taxes on those withdrawals are still due. You can pay your entire tax bill when you file your 2020 tax return, or spread out that tax bill over three years. But if you put the money back, you won't owe any tax on it for 2020, or any other tax year.

ALSO READ: How Are Your Mutual Fund and ETF Holdings Taxed?

Although 2020 is far behind us at this point, there are still steps you can take to lower your 2020 taxes. Keep these in mind as you tackle your upcoming return so you reap the most savings possible.

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