Do you want to get a big tax refund this year? The good news is that you can minimize your tax liability by taking advantage of every possible tax break. This way, you can potentially snag quite a larger refund.
This article discusses the five best strategies you should keep in mind to get the biggest refund possible. However, while these are some excellent short-term strategies, it’s essential to talk to a financial advisor if you want to minimize the amount of tax you pay in the long run.
Your filing status has a significant impact on your tax refund, and this is true whether you’re married or single. Most married couples file their taxes jointly because it makes more sense. Nevertheless, there are some situations where you should have a look at your filing status and decide whether it makes sense to file separately instead.
While filing separately means that you may miss out on some key tax credits, there are situations where it’s best to file separately. For example, if one of the spouses has a significant amount of business medical expenses, filing separately may increase the amount you can deduct by reducing the gross income.
It’s important not to overlook any of the key write-offs that your qualify for. Keep in mind that deductions don’t reduce the amount of tax you owe, but they reduce the amount of taxable income. If you have many deductible expenses, such as home-office expenses if you’re self-employed, mileage and lodging, or donations to charitable organizations, it’s a good idea to itemize when you file your taxes instead of just taking the standard deduction.
Tax credits reduce the amount of tax you owe on a dollar-to-dollar basis. For instance, if you owe $10,000 and claim a credit worth $2,000, your tax bill will drop to $8,000. Some of the most common credits include the Child and Dependent Care Credit, the Earned Income Tax Credit, and tax credits for education expenses.
By setting aside money in an IRA, you can get an additional tax bonus and build a nice nest egg. Your contributions may be partially or fully deductible, and you can fund your IRA for the previous tax year right before the filing deadline in April.
There are multiple ways to boost your tax refund, and it typically has to do with how you optimize your deductions, credits, and claims. Sometimes, even your filing status allows you to snag a bigger refund. Make sure you use good tax filing software and ask for advice from a financial advisor when in doubt.