How to Boost Next Year’s Tax Refund
Every year there is a debate about which is more beneficial to taxpayers getting a tax refund or ending the year with as small a refund as possible. However, thousands of taxpayers prefer to get a refund and often use these funds for specific purposes. Some of these include investing in their retirement accounts, making home repairs, paying for their college education, or taking a vacation. For those who prefer a refund, here are some simple ways to increase the amount of money you get back as a tax refund.
Accept a Smaller Paycheck
If you recently received a raise, you may want to consider increasing your withholding rates. For example, a person who is married with two children and filing a joint tax return can claim “withhold as single” on a Form W-4 with their employer. This would mean you would have less money in your paycheck but for most taxpayers, this would also mean a larger tax refund at the end of the year. This is a decision you should discuss with a tax preparer to ascertain the best deduction for your specific situation.
Save for Your Golden Years
Fewer than one-quarter of people have enough savings for retirement. This is a scary statistic and you can avoid being one of those without enough savings while still increasing your tax refund. Those under 50 can invest $18,500 annually and a portion of this may be claimed on your tax return, potentially reducing your tax liability and increasing your refund. Remember, deposits to your retirement savings reduces your taxable income number, meaning you will owe less in taxes, thereby increasing your refund in most cases.
Invest in Personal Growth
One of the most overlooked opportunities to increase your tax refund is by going back to school. This could also lead to a better job which could mean you will be earning more money. You can get a credit of up to $2,000 if you pay tuition any time during the tax year. Remember, you do not have to be working towards a degree to take advantage of this credit, you can take any courses at an accredited college and qualify. You may wish to check with a tax preparer before taking classes to determine if there are restrictions you should be aware of before spending your hard-earned money on tuition.
Commit Yourself to Making a Difference
Philanthropy is good for your community, helps those in need and may also provide you with some tax benefits. Donations do not have to be in the form of cash to provide benefits to those in need and be tax deductible. You can donate furnishings, clothing, and other household goods and take advantage of tax deductions if you itemize. This means an increased tax refund in many cases. Remember, it is important to properly log the amount of your donation, and make sure the charity is recognized by the Internal Revenue Service (IRS).
When donating clothing, furnishings, or other household goods, it is a smart to get an idea of the value of these items prior to donating. Used items do not have the same value as new items, however a chair, kitchen set, or sofa in good condition could still have a fair amount of value when using the item as a tax deduction.
Track Your Donations and Expenses
Commit to keeping better records whether it means putting receipts and canceled checks into an envelope or folder and leaving them in an area that makes it easy to remember to do this. You can always sort them out later if you decide to itemize deductions on your tax return which can be beneficial if you are interested in boosting your tax refund. Having these records available can also help your tax preparer determine which donations and expenses can be documented potentially saving you a hassle in the event of a tax audit.
As you can see, proper recordkeeping plays a role in what you can claim as a deduction on your taxes. If you are interested in maximizing your deductions and making sure you are getting the maximum tax refund on an annual basis, contact Rue & Associates for help. We provide services in Central Virginia including Mechanicsville, Richmond, Hanover, Henrico and surrounding areas as well as clients nationally. We have built our reputation on providing excellent customer service to both individual taxpayers and business owners thanks to our well-seasoned staff which includes experienced businesspeople and accountants, tax professionals, enrolled agents and CPAs who bring a unique perspective in delivering financial, management, and tax services to our clients.