No matter how much money you make, you may always want to get the most out of your tax refund. It’s a common goal that’s shared by almost everyone. This is also why you can see a lot of tax services claiming to fetch you the biggest refund you can get.
Even though some of these providers can increase your tax refund, they can also charge you a lot in service fees. This makes it important that you at least know the basics of getting a higher tax refund. Even if you work with a reliable tax preparer in the end, this knowledge can help you decrease your service costs.
To help you with this goal, here is how you can maximize your tax refund.
Know your income and expenses
If you want to enjoy the full benefits of e-filing, it’s important that you learn about your total income and expenses. When you know about your income sources, your spending, and your losses, you can get an exact idea of what types of strategies you can use to reduce your tax bill and maximize your refund. By keeping a record of your annual transactions, you can easily get through this part of the process.
Look into applicable deductions
Tax deductions are often the first stop for increasing your tax refund. This is where you can shave off certain sums, like student loan interest, from your income in order to reduce your taxable income. When you enter these deductions into software for tax preparers or tax filing apps for individuals, the reduction in the taxes you owe can increase your tax refund. You can also claim multiple deductions in a single year.
Explore available tax credits
While tax deductions reduce your taxable income, tax credits directly lower your tax bill with a dollar-by-dollar reward. You can earn these credits in a lot of ways, like proving that you have a child under your care or showing that you invested in residential solar energy. Since there are a lot of tax credits available, you can check the Internal Revenue Service (IRS) website and use a notes app to list the ones you can claim.
Increase your withholding
If you are a salaried employee, you might see that a portion of your paycheck already goes towards tax each time you get paid. This is called tax withholding, which ensures that an estimation of your payable tax is already transferred to the government. If you have a higher withholding, it can reduce your annual tax bill and add to your tax refund. This keeps you from going the route of corporations that evade taxes.
Use refundable credits
Tax credits can often reduce your tax bill to zero. In a lot of cases, you may still have some credits left to claim afterward. In some situations, these credits are refundable, which means that you can add them to your tax refund. Since refundable tax credits can often be of a significant amount, you might want to put them in an online savings account instead of letting that money sit idle in a checking account.
Maximize your retirement contributions
While learning to maximize your finances, the advice to prepare for retirement often stands front and center. This suggestion is also beneficial for increasing your tax refund because the money you put towards an individual retirement account (IRA) is tax-deductible. This helps you save for the future while also lowering your burden in the present. Unless you take money out of your IRA early, you can continue using this strategy without any financial penalties.
Consult with a tax accountant
For many people, learning about these strategies can be enough to put them to work, like using a budget planner for financial management. But for others, it can be overwhelming to navigate through them. If you feel like you need some assistance, don’t be embarrassed about it. Instead, focus your energy on finding a reliable tax accountant who has good reviews but doesn’t cost a fortune. This can help you easily enact ways to increase your tax refund.
These tips are not that hard to follow, but they are effective in their results. When you stick by these suggestions during your tax filing, you can maximize your tax refund at the end of every year.