Every year Americans scramble to gather their yearly expenses, receipts, and other tax information. Then we pray that we don’t owe any taxes.
Those who are lucky actually end up receiving a tax refund. But most of us find taxes confusing. Especially with the new 2018 tax laws.
Often, we’re unaware that there are steps we can take throughout the year that help us get a larger tax refund when April rolls around.
Which is why we decided to compile our seven favorite tips to help you make the most out of your money. Keep reading to learn how to get a bigger tax refund.
1. How To Get a Bigger Tax Refund By Contributing To Your IRA
If you want to know how to get more money back on taxes, look for an opportunity that also allows you to save for your future. If you haven’t already, it’s time to open your own traditional IRA.
The younger you are when you open your IRA, the more money you’ll accumulate in your IRA over the years.
And you have until April 15th to open that IRA for the previous tax year. Not only will that provide you with the flexibility to claim the credit on your tax return, you can file early and use your refund to open your account.
A traditional IRA contribution will reduce your taxable income. It’s in your best interest to take full advantage of the maximum contribution.
2. Look For Your Deductions
While it’s true that if you’re looking to find out how to get the largest tax return possible, credits normally do tend to yield a large tax return than deductions.
But don’t discount any write-offs you qualify for because those deductions will help reduce the amount of your taxable income.
Don’t forget about business expenses count. Rather than taking the standard deduction, consider itemizing those deductions. Deductions include donations, mileage, lodging, mortgage interest, job hunting expenses, and even gambling losses.
Keep records to back up your claims.
And while paying your accountant is considered a tax deduction, it’s not always possible to pay him or her on time. But you’re not out of luck.
Finding an accountant who uses bank products can help. If you’re wondering how do bank products work, click here.
3. Time Things Right For a Larger Refund
Timing is everything even when paying your taxes. If you want to know how to get the biggest tax refund, then mark your calendars.
If you pay your January mortgage prior to December 31st, you can get the added interest for your mortgage interest deduction. But there are more timed deductions to pay attention to.
Like paying your property taxes before New Year’s Eve. You’ll often find a larger refund becomes possible.
Try to schedule your health-related exams and treatments in the last quarter of the year. You’ll boost your potential of deductible medical expenses.
And for those self-employed readers, try paying your fourth-quarter taxes in December, rather than January to increase your itemized deductions.
4. Increase The Amount You’re Withholding
For those who are employed full time by a company and are wondering how to get the most tax refund, then consider taking a trip to your HR department. When you first began work, you had to fill out a W-4.
The information you provided on that document determines how much money is withheld from each paycheck and paid towards your personal income taxes. It’s based on the number of exemptions you’re claiming.
More exemptions mean less money. If your goal is to increase your refund, request to change your W-4 form and reduce the number of exemptions.
While some companies have policies on when you can change your W-4, the IRS has no policy and allows changes to be made year-round.
5. Claim All Your Tax Credits
While deductions are great, credits are even better. Here’s how to get more tax refund by claiming your tax credits.
A tax credit works on a dollar-for-dollar basis. If you owe $5,000 in taxes to the IRS and claim a credit worth $1,000, your bill would then drop to $4,000.
And certain credits are refundable. You can even claim them if you don’t have any tax liability.
Many credits involve dependents like the Child and Dependent Care Credit and the Child Tax Credit. But there’s also an Earned Income Tax Credit and credits available for educational purposes.
Your eligibility depends on your filing status, income, and whether or not you have eligible dependents. For certain credits related to education, there are additional guidelines for when you can claim tax credits and which credits are applicable.
There are also credits available for certain home improvements and the Premium Tax Credit which offsets the cost of your federal health care exchange premiums.
6. Consider Refinancing Your Home
Refinancing your home is a smart idea when interest rates are low. You’ll benefit from lower mortgage payments and you’ll pay less on the total amount paid over the life of the mortgage.
But refinancing can also help you get a larger tax refund. Let’s look at a fixed rate mortgage. Each payment is divided between money that’s applied towards the principal and toward the interest your bank is charging to lend you that money.
During the first years, most of the monthly payments are applied toward more towards the interest amount than the principal. Each month you pay your mortgage, the equation tips more towards the principal until you’re paying more towards the principal than the interest.
Refinancing your home resets this equation. Once again, the majority of your monthly payments will go towards paying down the interest.
This is a good thing since the principal amount isn’t deductible, but the interest is. Meaning, you’ll end up with a larger tax deduction thanks to the higher interest payments.
7. Review Your Filing Status
If you want to learn how to get more money back on taxes, check your filing status because what you choose can greatly influence how much of a refund you receive.
Your status may have changed due to a divorce or death, making you eligible for a larger refund. Most married couples enjoy a larger tax refund by filing jointly.
However, for couples with large amounts of unreimbursed medical expenses, large amounts of deductions, or one spouse is behind on student loan debts or child support, they should consider filing jointly.
If you want to know how to get a bigger tax return, just keep educating yourself.
We can help. Keep reading our blog to learn our latest tips.