While no one wants to pay taxes, it’s an inevitable part of life. If you make money then you have to pay the government a portion of that money. It really doesn’t matter how you make your money, you will have to pay some of it to Uncle Sam. The rates will vary depending on how you earned it and on how much you earned, but regardless of the differences you can’t keep all your money for yourself. So now that that’s clear and you know that you can’t legally avoid paying taxes, the big question is how to save on taxes, or in the case of filing your tax return, how do you get a bigger refund?
Before we get into that, you should know that it’s actuality best to get a smaller refund at tax time. That might sound crazy, but your refund is based on the amount of money you overpaid in taxes throughout the year and giving Uncle Sam more than you owe is giving the IRS an interest-free loan. If you had been keeping that extra money, which was rightfully yours to keep in the first place, what could you have done with it? For example, what if you had invested it? How much more money could you have made? Even if you put in the bank you could have earned some interest on it. If nothing else, you would have had more income at your disposal at different times of the year. So, even though everyone likes a big refund, in most cases it’s better to get a small one.
If you still prefer to get a big extra check from the IRS as opposed to a small one, then here are some things you can do that could make a difference. One thing to consider is your filing status. Most married people file jointly, but under the right circumstances, it might actually be more beneficial to file separately. One way to know for sure is to calculate your taxes both ways and see which on gives you the larger return.
Another way to increase your tax refund is to take advantage of all your deductions. Don’t be afraid to use every deduction you’re entitled to use and keep track of all the receipts. Also, consider any moving expenses, charitable deductions, money paid to a retirement account and any business expenses that were not reimbursed. These are all ways to increase your refund.
Many taxpayers are aware of a trick with their mortgage payment that can help with deductions as well. If you pay your mortgage payment for January at the end of December, then you can count that extra interest paid as part of your deductions. You can also do the same thing with medical care. If you know you can deduct certain health-related expenses then schedule those procedures at the end of the year instead of waiting until the calendar changes.
A lot of taxpayers are aware that they can deduct many expenses from their tax return. However, some taxpayers don’t realize that they could also be eligible for many common tax credits. For example, the earned income credit is a great way to boost your refund if you are a lower income household. However, about 20 percent of those taxpayers that are eligible don’t claim it. The Child Tax Credit and the Additional Child tax Credit are two other credits that can greatly increase your refund as well. There are all kinds of ways to give your refund a nice boost. The important thing is to know what they are so you don’t miss out on them. So make sure you do your homework, or seek the help of a professional and make sure you get the most out of your tax refund this year.
This post was published on April 25, 2016