Every taxpayer hopes to reduce their tax liability and receive the most money back in form of a tax refund. However, without the relevant knowledge and experience, knowing the options available can be difficult. A little research and simple tax planning will go a long way in helping you get more out of your tax return.
Here are a few legal ways you can boost your tax refund.
KEEP UP WITH THE TAX CODE
Keeping up with the tax code can be a mind-numbing undertaking. The federal government has its own tax code as do other authorities that impose taxes. Also, tax laws and regulations can change from time to time. To boost your tax refund, you need to keep an eye on your tax code. This will make it easy for you to know what you can deduct.
EVALUATE YOUR FILING STATUS
The filing status you choose will directly affect the size of your refund. You can choose to file your returns as a single person, head of household, separate filing for one spouse or joint return for married couples. Your status will determine your filing requirements, your standard deduction, the credits you are eligible to receive and how much tax you pay. It is important to ensure that the status you choose suits your needs.
EMBRACE TAX DEDUCTIONS
A good number of people are not aware of the many tax deductions that exist. This makes it difficult to take advantage of the reductions to lower their taxable income. You should embrace deductions like student loan interest, state sales tax, out-of-pocket charitable contributions, medical miles, and business travel expenses. Make sure you keep good records of your deductions throughout the tax year.
CLAIM ALL AVAILABLE TAX CREDITS
Understanding the specific tax credits you are eligible for can help you to significantly reduce or eliminate the amount of taxes you are required to pay. Credits can also help to increase the amount of tax refund you receive. Some credits you may claim are Earned Income Tax Credit (EITC), child and dependent care credit, child tax credit and additional child tax credit, and lifetime learning credit.
INCREASE YOUR HSA AND IRA CONTRIBUTIONS
When it comes to boosting your tax refund, every penny counts. Both HSA and IRA contributions can significantly reduce your taxable income. These contributions may be partially or fully deductible and may allow you to claim a tax credit. In case you want to get a bigger tax refund, you should consider maximizing your contributions.
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MEET THE DEADLINES
To boost your tax refunds, you need to file and pay your taxes before the set deadlines. If you take too long to file a return or claim a refund, you run the risk of losing your refund. Reporting all your income will also help you to avoid interest and penalties for unpaid taxes.
HIRE A PROFESSIONAL ACCOUNTANT
An accountant who is a tax specialist understands the ins and outs of tax preparation. The expert will do the math for you, ensure the right numbers are entered and see to it that there are no arithmetic errors. This will help you increase your tax refund.