It’s everyone’s favorite time of year: Taxes and most importantly, TAX REFUNDS!
For those of you that have already filed, I found a neat infographic showing the direct deposit schedule. Good job to the early birds!
Here are some helpful hints for when you’re filing to get the biggest refund that you can get:
#10 Increase Withholding: this is super easy to do and may be painful throughout the year, but is so worth it during refund time! On line 5 of your W-4, mark a zero. This will have the government take out the maximum amount of taxes from your paycheck. You’ll get a greater refund because of this!
#9 Deduct Your Donations: Deductions for charitable donations can offer substantial tax savings, thereby making a large and profitable difference in your refund. All types of donations are eligible as tax deductions to help lower your tax bill.
There are some restrictions, though. One is that the donations must be made to a nonprofit that can prove 501(c)(3) tax status. Most legitimate charities state clearly on their Web sites or in their literature that they’re 501(c)(3) nonprofits, so it’s usually simple to verify.
#8 Deduct Your Professional Expenses: Some jobs require employees to have or use equipment that the employees purchase out of their own pockets. If the company doesn’t reimburse for those expenses, some may be deducted on income taxes to help maximize a tax refund.
#7 Review Your Filing Status: status, such as single, head of household, married filing separately or jointly, and others, can greatly influence the amount of money you receive in your refund. Filing status may change if you divorce or lose a spouse to death, for example, and this may make you eligible for a larger refund.
#6 Don’t Forget Your Family: Taking care of kids (and these days, aging parents) can rack up huge expenses. Did you know many of those expenses are deductible? Fortunately, you can deduct dependent care, or the costs associated with taking care of your dependent children and parents.
#5 Increase Your IRA Contributions: One of the most highly recommended ways to increase your tax refund is to increase your contributions to your retirement fund. Contributing to an Individual Retirement Account (IRA) not only facilitates saving for retirement, but placing money into the IRA lowers the total taxable income because it comes off the top. The more you contribute to the IRA, the less of your income is subject to taxes. Generally, the lower your taxable income, the less you’ll owe in taxes, and the less you owe in taxes, the greater the refund.
#4 Make Your Home Even MORE Beneficial: When interest rates are low, many homeowners look at refinancing their homes. Those who refinance at a lower interest rate benefit from lower mortgage payments as well as a lower amount paid over the life of the mortgage. But did you know refinancing could also bump up your tax return?
#3 Pay Attention To Current Tax Laws: Changes in tax laws can bring tax deductions, if you know where to look. A recent law includes new homebuyer credits that basically put thousands of dollars in some home purchasers’ pockets. If you remodel your home and incorporate energy-saving improvements, you can receive credit for this eco-friendly act. You may also gain financial favor from the IRS if you purchase certain hybrid vehicles.
#2 Start Your Own Business: If you’ve ever thought about starting a business in the hours around your regular job, or you’re a stay-at-home-parent with a great idea, starting a home-based business can make a lot of fiscal sense. The equipment you use for your business, and portions of the facilities and utilities, may be deductible. And you’ll (hopefully) be making money, too!
#1 Invest In Tax Planning: Tax planning is one of the best ways to take advantage of all these deductions and get the maximum tax refund possible. Tax planning often starts at the very beginning of the year and takes into account how much money you’ll earn and how different expenses (or extra income) affect the total tax amount that you’ll owe. Planning also helps you evaluate different ways of using your money to buy needed, deductible items or make other tax-reducing investments. A tax-planning professional (or you, if you’re your own best accountant) can play with the numbers in computer software to evaluate what changes you can make to lower the tax bill, therefore upping the refund.
So, here’s to sitting down with a glass of wine, getting these taxes figured out, and (hopefully) getting the best refund that you can!