How to Get a Bigger Tax Refund
Tax experts argue that it is better to adjust your withholding than owing taxes or getting a big tax refund. However, many Americans look forward to scoring some extra cash when filing for a tax refund. It is reasonable to ensure that you get back most of the money as a tax refund. Take advantage of every possible tax break to minimize your tax liability. In turn, this will potentially snag a larger tax refund. Here are a few tips from our experts to keep in mind when you are preparing your tax return. They will help you get a bigger tax refund.
Consider Your Filing Status
Your filing status can have a measurable impact on your tax refund. It has an effect regardless of whether you are single or married. For most married people, it becomes easy to file that tax return jointly. Nonetheless, some situations require filing individual returns.
For instance, filing a tax return separately if you or your spouse has a considerable amount of medical or business expenses may be right. It may reduce your adjusted gross income and increase the amount you can deduct. Conversely, filing separate tax returns implies that you may miss some vital tax credits. It is prudent to run the numbers to see which filing status yields the best benefit.
If you are single, it will be best to look into whether you qualify for head of the household status. Generally, you require to have paid more than half the cost of maintaining a household in the past tax years. For tax purposes, this could mean the expenses of a child or a dependent adult, or an aging parent. If you can file the tax returns as head of household, it could give your refund a substantial boost.
Claim Your Credits
A tax credit is directly proportional to the tax one owes to the IRS. Furthermore, a tax credit reduces the tax you owe to the IRS on a dollar-for-dollar basis. For instance, your bill can drop to $5,000 if you owe the IRS $6,000 as taxes and a claim a credit worth $1,000. Some specific credits are refundable. This means that you can claim the credits even if you do not have any tax liability.
Common tax credits by the IRS include the Earned Income Tax Credit and the Child and Dependent Care Credit. In addition, the Child Tax Credit and tax credits for education expenses are also tax credits. The taxpayer’s eligibility to claim these and other tax credits depend on income and filing status. It is also dependent on whether a taxpayer has eligible dependents. There are additional guidelines regarding credits related to education expenses and the period that one can make a claim.
It is imperative to note that one may earn credits for making certain energy efficient improvements to a home. The IRS has a Premium Tax Credit. It is designed to offset a fraction of the cost of insurance premiums purchased through the Federal Health Care Exchange.
Do not Forget the Deductions
Typically, credits yield a more significant tax return than deductions. Nevertheless, that does not imply that you should overlook vital write-offs you qualify for while making a tax claim. Rather than reducing the amount of tax you owe, deductions trim down the amount of income that is subject to taxation.
When filing taxes, you have to decide whether to take the standard deduction or itemize. The best choice is itemizing, especially why you have many deductible expenses. The expenses may include business expenses such as mileage and lodging, donations to charitable organizations, and mortgage interest. Also, the expenses may consist of student loan interest, moving expenses, job hunting expenses, and even gambling losses.
Of course, the amount of each deductible expense varies. It is vital to ensure you obtain appropriate records to back up the tax refund claim like receipts or bank statements.
Max Out Your IRA
Keeping some money in a traditional IRA is an excellent way to build your nest egg and score an extra tax bonus. Notably, a taxpayer can fund his or her IRA for the previous tax year right up to the April filing deadline. While doing this, the contributions may be partially or fully deductible.
Not only that, but you may also be able to claim a tax credit for your contributions. The Retirement Saver’s Credit affects contributions to both traditional and Roth IRAs. Nevertheless, one must meet specific income guidelines to qualify.
Every penny counts when it comes to filing taxes. The more a person understands which tax benefits they qualify for, the more refund they will put in your pocket.
With the above tips, we believe that you are now in a better place concerning increasing your tax refund. If you want more information about IRS and the Tax Refund, feel free to contact our experts at Mount Bonnell Advisors.
