How to Maximize Your Tax Return | 15 Biggest Tax Refund Tips

15 Ways to Get the Largest Tax Refund Possible

 

The biggest thing about filing tax returns is accuracy. No one wants to get audited, and more than avoiding issues with the IRS, everyone surely wants to cut down their tax bill. Get more tax deductions and credits. The number you end up with don’t need to be the total amount you need to pay. Get the most massive tax refund possible through tax know-how.

There are many things you can do to boost your refunds. We’ve created an extensive list of things guaranteed to improve your tax return and increase your tax rebates. Apply our 15 tips and get more money back, free and clear.

1. Prepare Your Taxes Early

The key to boosting your refund is to prepare ahead of time. You should be more aware of what has changed because of the Tax Cuts and Jobs Act signed last year. Are you aware of the several changes to tax deductions and credits that can apply to your tax bracket, your household, and even your studies?

Meet your tax preparer early or check a tax preparation software that fits your needs. Leave the pro enough time to discuss with you, prepare your taxes, and determine the best course of action. This way, you can know how to get a big tax refund with no dependents.

Most of all, you can be sure to claim every eligible tax credit and deduction. 

2. E-file Your Tax Return

Are you preparing your taxes the traditional way? E-filing is one of the most accurate ways to file your returns, with 80% of Americans preparing and submitting online.

If you are the type to wait the last minute to prepare your taxes or are easily confused by all the forms, e-filing is the way to go. 

You can also do your taxes more accurately by using or subscribing to a tax preparation software online to save up on money and reduce any errors. When you prepare your taxes using software, you can save your data and come back to your application to continue especially if you don’t have a whole hour or more to sift through your IRS forms and receipts.

You can try using free tax preparation software such as Locustax to cut down on costs even more.

3. Rethink Your Filing Status

Your status when filing your returns influences your eligibility for credits, refunds, and deductions and getting a bigger refund.

For example, even though the majority of taxpayers who are married to file a joint return, it might not always be the best option for everyone. Yes, it’s more convenient and easier to accomplish a joint IRS return for married couples. However, the extra effort you will put in married-filing-separately returns can pay off in the right situations.

Some deductions are based on Adjusted Gross Income (AGI), and filing separately will generally result in lower AGI for each spouse. You can apply these deductions to different expenses, from medical fees or other necessary expenses, such as COBRA payments when one gets laid off from work.

Take Advantage of Head of Household Deductions

Another type of status is head of household, where single taxpayers can get more tax deductions for their dependents. For example, single parents or those who spend more than half on their parent’s residence or for their senior home fees can claim these deductions.

However, some deductions only apply to one or the other. Filing separately might make you ineligible for some deductions applicable to joint filers. Take your time and calculate for both options so you can see which status gives you a higher refund.

4. Add To Your Retirement Savings Account

A smart way to reduce your taxable income without actually cutting into your fund is by putting that money into your retirement funds.

You can either beef up your employee-sponsored 401(k) or open up a traditional IRA. In this case, the IRS allows you to double-dip: you can get up to $5,000 tax deductions ($6,500 if you’re 50 years old or older) in saver’s credit plus an additional $1,000  if you contribute to your retirement plan.

Take note that Roth IRA’s or Roth 401(k) are not tax deductible.

And even if you don’t have the money before the year ends, you can still make contributions until before the deadline and label it for the 2018 tax year. Also, only put in money you’re sure you won’t be needing, as withdrawing money before your retirement may incur you penalties.

Before you drop that chunk of money into your account, check with the IRS website as there may be limits on tax deductions depending on your income bracket and or if you have an employee-sponsored retirement plan.

5. Contribute To Your Health Service Account

Just like your retirement savings account, your Health Service Account is also tax-deductible.

HSAs don’t only give you a tax break, the amounts you earn from this account are also tax-free if you spend them for medical-related expenses.

You can contribute as much as $3,450 for individual HSA’s and $6,900 for family HSA’s. You can also add to this account until before the April deadline and have it counted for in the 2018 tax year.

Eligibility Criteria for HSA Deduction

However,  it’s not as easy to get an HSA as it is to get a retirement plan. To be eligible, you must satisfy the following criteria:

  • You don’t have Medicare
  • Your health plan is high-deductible (HDHP)
  • You don’t have another health coverage other than HDHP (there are some exceptions)
  • You are not listed as a dependent on someone else’s tax return

6. Claim Dependents That You’ve Been Supporting

The government is considerate with hard-working breadwinners and has tax deductions for dependents that they support. With the new Tax Cuts and Jobs Act of 2018, there are notable improvements to the Child Tax Credits.

You can claim for dependents other than your children.

You can now claim for your other relatives such as your parents and grandparents, nephews and nieces, and siblings but only if they live under your roof for more than half of the year. They also have to be financially incapable of supporting at least half of their expenses for the year.

New Child Tax Credits

You can claim twice the child tax credit of the previous year which is now at $2,000 per qualifying child. You can also claim $500 for each non-qualifying dependent. Additionally, tax credits are now refundable even when you zero your tax liabilities.

Not everybody knows about this new clause, so make sure you declare all eligible dependents to increase your eligible refunds.

7. Defer Bonuses

how to maximize tax return tips

If your company is feeling generous with this year’s bonus, you might want to think about its effect on your tax returns. Don’t forget that aside from your regular income, your bonuses are also taxable compensation.

Your bonus tax rate depends on the payment method.

Is it given separately or together with your regular wage in one big fat check? If it’s offered as a separate check, then your bonus tax can be calculated using the percentage method. If it’s given together with your regular salary, then the aggregate method will be used.

Defer Your Bonus

Whichever of the two methods used in calculating your bonus tax will dictate how big of a chunk will be deducted from what you will receive. Using the aggregate method might even bump you up your income bracket,  and you will end up with higher tax rates.

Knowing all this, you might want to consider deferring your bonus pay to January if your boss will allow for it. You won’t have to pay taxes on it if you delay your reward for a little while.

8. Claim All Eligible Tax Credits

Credits are a great way to cut down your tax bill AND get cash, especially if it allows the taxpayer to refund even if your tax bill is zero. That’s a dollar-for-dollar reduction, and you also get to “keep the change.”

Several tax credits work like a charm in boosting your refunds, don’t miss out on any that may apply to you.

One example is the earned income tax credit (EITC), which many qualified Americans overlook and fail to claim. You can claim this even when you’re not married, and you don’t have children. And if you do have kids, the child-care credit is additional help.

Another tax credit you may be interested in is the American Opportunity Tax Credit. This applies for the first 4 years of your child in an undergraduate course. Up to $1,000 is refundable of the $2,500 credit, even when you have no tax liabilities. The Lifetime Learning Credit is for those in grad school or other post-college classes.

9. Take Relevant Courses

how to maximize tax return tuition credits

As was mentioned in the previous item, you can claim tax refunds from your expenses for pursuing higher education. You can take classes and courses to advance your career. This will make you eligible for Lifetime Learning Credits of up to $2,000 if you pay before the year ends.

Although this requires effort and commitment and not to mention money for your tuition and fees, you get valuable returns in the form of career advancement. Of course, this is on top of the deductible taxes. You don’t even have to shell out huge money for full-blown courses or master degrees. The TCJA allows other non-degree classes to be considered for the tax deductions.

10. Check If You Can Itemize

Instead of standard deductions, try to itemize if you can to be able to maximize your tax deductions.

Standard deductions set $6,350 for single filers and $12,700 for joint filers as deduction amounts. Itemized deductions are time-consuming and take a lot of effort. But compiling all your receipts can give you bigger tax deductions if only you take the time to sit down and compute.

Other expenses such as charitable donations will be counted for in itemized deductions, including casualty losses and unreimbursed expenses. Compute the tax deductions you will get from itemizing and compare it to the fixed rates for standard deductions to see which you should choose.

11. Check Above-The-Line-Deductions

You can deduct your amount taxable to your income without itemizing through above-the-line-deductions. Some examples of eligible expenses include going back to school to advance your career, self-employment taxes, paid alimony, etc.

Of course, you can’t declare the same expense twice in different kinds of tax credits or deductions, but make sure that you consider everything possible and see if you’re eligible for the tax refunds and deductions.

12. Donate To Charity

how to maximize tax return donate to charity

They say when you do good deeds, you shouldn’t wait for something in return. Well, for the case of charitable goods, you are rewarded with tax deductions for your donations. 60% of your AGI in philanthropic contributions can be deducted. Just make sure that you’re donating to a qualified organization, or else it won’t qualify for tax deductions.

You can also donate in kind if you don’t have much money to give away.

As long as they’re in good condition, clothes and other useful items you no longer need will go into charitable donations. They are priced at fair market value and can be deductible from your taxes.

This option lets you cut down your tax bill without actually shelling out your money. Take this opportunity to rummage through your closet and give to the community. Strategize your donations because timing is essential. Giving more significant contributions every other year rather than giving small amounts often within the year might give you more tax refunds.

13. Use Your Remaining FSA

If you have unused funds in your Flexible Savings Account, you might want to use it before this year ends. Only a maximum of $500 can be carried over to the next year, or you may be given 2 ½ months after the year ends to use up the remaining funds.

Use your remaining balance to get checked up with your doctor. It’s wise to invest in your health using your FSA instead of having it all (except for the remaining $500) disappear at the end of the year.

14. Sell Low to Maximize Your Tax Return

Did you earn a lot from your investments? Don’t rejoice just yet- Significant capital gains you made the previous year can give you Capital Gains Tax to pay. However, this doesn’t mean you will take a beating from all the money that you’ve made. You can offset this by selling your bad investments.

If you have investments that are at a losing position, you can liquidate those during the year. If your losses are higher than your capital gains, you can deduct the difference of up to $3,000 ($1,500 for single filers) from your tax returns. More than that, any extra will be carried over and considered for the next tax year.

15. Optimize And Strategize With Time

There are 12 months in the tax year and knowing the best timing for each expenditure can get you bigger refunds. Watch your calendar and figure out when the best time is to be making the necessary payments.

  • Paying your January mortgage in advance before the year ends can give you additional interest for your mortgage interest deduction.
  • Getting all check-ups and medical procedures done within the last quarter of the year can increase your tax refund potential.
  • If you pay your property tax or your estimated taxes before the year ends rather than on January, you can increase your itemizing potential for more significant refunds

Bonus Tip: Get Organized With Your Expenses And Receipts

This is an essential tip because it helps a great deal when you are preparing your taxes. When you have everything collected and organized, it’s easier to calculate your expenses and tax deductions. It doesn’t only save you time. It also guarantees you the maximum tax refunds you can get.

Make a habit out of it to keep all the necessary receipts. Keep in mind that these small pieces of paper may mean cash when tax season comes.

 

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