Many Americans are preparing to file their taxes now. In most cases, this can be a bit of a time-consuming task but the result is a refund check which is greatly anticipated and appreciated. The holiday bills need to be paid and it’s also time to think about planning this summer’s vacation. Those are just a couple of the potential uses for your tax refund. But what many people don’t think about is that investing just a little bit of time and planning can turn a small income tax refund check into a much larger check. Here is some important information everyone needs to learn to know how to get a bigger tax refund.
Make Sure You Are Keeping a Record of All Deductions throughout the Year
Most people don’t want to think about getting tax information organized until February at the earliest. But that mindset can be costly. Will you really be able to sit down and remember all of the donations you made over the entire year? You probably won’t unless you track the information regularly. A great way to ensure that you are remembering all of your deductible expenses and charitable contributions is to create a spreadsheet or notebook to compile the data. It’s not realistic to think that you will take the time to enter the information each day but entering the data each month as you pay bills can be a very efficient means of keeping a detailed record. Small items might appear to be of little value but over the course of an entire year they will add up to a nice deduction.
What Expenses You Need to Track to Increase Your Tax Refund
Almost everyone is aware that they can deduct money that they donate to a charity, but there are many other items that can help you get a bigger tax refund if you keep accurate records. You can deduct the mileage you drive on behalf of a charity. If you deliver meals or gifts to the elderly for your church or for a senior meal program, then you can deduct that mileage as long as you have the documentation to support the deduction. You can also deduct items given to charities such as Good Will or Disabled American Veterans, just be sure to get a receipt for the items when you drop them off or when the charity picks them up. In addition to charitable expenses, be sure to track any professional expenses that you are not reimbursed for such as professional organization dues or fees, clothing purchased solely to be worn at work, mileage traveled to meet clients or business meals. And don’t forget expenses related to your home. Interest paid on your mortgage or a home equity line of credit are tax deductible. In addition, if you run a small business out of your home you can take other deductions like the cost of internet service, a phone line or even a portion of your mortgage payment or rent.
How a Few Minutes Reading Can Save You Money
Tax laws are always changing and it’s a good idea to read up on each year’s new wrinkles in the system. Recent years changes have included new credits for making energy-efficient improvements to your home and also for purchasing a hybrid vehicle. These credits actually affect your refund on a dollar for dollar basis so they can be even more valuable than a deduction. While you are doing research, don’t forget to review your filing status and its complete definition. That status change can increase your standard deduction. Also review your current withholding amount. You might want to increase your withholding amount this year to ensure a larger refund next year. Increasing withholding is also a great idea if you know that your deductions are going to drop in the coming year. Some examples of this might be paying off your home or selling it and not having any mortgage interest to deduct, no out of pocket medical expenses to deduct or a child who is no longer in childcare. Losing these deductions could result in owing taxes rather than getting a nice tax refund check, but adjusting your withholdings now can avoid that situation next year.
The Benefits of Caring for Others
You might already know that you can deduct the cost of childcare if you or your spouse work, but were you aware that you can deduct the cost of care for an elderly parent or a disabled family member? Take a few minutes to read about all of the deductions available for care of family members and dependents. You will also find that alimony paid to an ex-spouse is tax deductible.
The Benefit of Providing for Your Own Retirement
All of the other deductions and credits discussed here have been items that you need to plan ahead for and prep for during the tax year. But there is one deduction that you can still take advantage of even after the tax year is over. Taxpayers can contribute to their own IRA and their spouse’s IRA, even if that person is not working, until the tax deadline of the following year. So you can contribute this year to get a deduction on last year’s taxes. But be sure to complete that transaction before you file your taxes to take full advantage of the deduction. The maximum amount you can contribute is $5,500 per person or $6,500 for a person who is age 50 or older.
Make the Choice to Learn How to Get a Bigger Tax Refund
Paying taxes is something that everyone has to do, but it is your choice to learn how to get a bigger tax refund. Many of the tips require just a small amount of time to compile information and they offer a nice reward. Spending just a few minutes each month tracking expenses will let you add up deductions at the end of the year and not have to spend hours or days sifting through receipts and notes. A simple spreadsheet can increase your refund by hundreds of dollars or more. So choose to start planning for next year’s tax refund right now. And also decide if you want to contribute to an IRA retirement account to lower your tax liability for last year. It is one of the only option available to help you get a bigger tax return on last year’s taxes. What you learn now and the time that you invest will help you to get a bigger tax refund each year.
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