Increase Your Tax Refund: You could be looking for solutions to lower your tax liability because the tax filing deadline is approaching on April 18, 2023. The expiration of certain pandemic-related tax benefits is just one of the recent tax changes that may result in some taxpayers receiving lesser refunds this year. In this article, know about ways to Increase Your Tax Refund.
Yet, it doesn’t follow that you can’t find measures to boost your tax refund. You can optimize tax-saving options and perhaps get money back from the government with careful tax preparation and filing procedures. By using TurboTax to file your taxes right away, you can ensure that you obtain the biggest refund possible.
Increase Your Tax Refund
Consider particularly the following actions:
The most advantageous filing status
Choosing the correct file status is the first step to maximizing your tax refund. There are five alternatives for that:
- couple filing jointly
- spouses filing separately
- the family’s head
- a qualified widow or widower with a dependent child
If you only qualify as a single filer, for example, changing your filing status might not always be possible. Yet, it’s possible that you were unaware that you qualify for some tax benefits, such as a higher standard deduction, as the head of household, in which case.
Or, you might discover that you can lower your taxable income by taking advantage of higher restrictions, such as those for married couples filing jointly as opposed to married couples filing separately.
However, some taxpayers discover that doing their taxes independently from their spouse allows them to claim greater tax deductions, for instance, if one spouse has a year with significant medical expenditures and is able to itemize deductions. Examine your situation to see what makes sense.
When You Can, Itemize Your Deductions
You can lower your tax obligation more if you can itemize deductions than if you just use the standard deduction. You don’t want to spend money excessively just to itemize, but you might have more opportunities than you thought.
For the first $750,000 of debt, if married filing jointly, you can deduct the interest you pay on a mortgage for example. In light of this, if you recently purchased a property, you might be allowed to start itemizing your taxes.
Contributions to charities are a typical itemized deduction as well. Amy Hamasaki, owner, and lead planner at Mountain Wealth Planning offer advice to group your costs together if you don’t have enough to itemize them.
Make larger donations every few years, she advises, as opposed to smaller ones every year.
Use the new tax credits available
You should still look to claim tax credits when available, even if you don’t itemize your taxes. By doing this, you can cut your tax obligation in half, so if you owe $3,000 in taxes but have a $1,000 tax credit, your tax obligation would be reduced to $2,000 instead of $3,000.
The fact that many tax credits are non-refundable should be noted. Hence, if your tax credits are nonrefundable and your tax burden is reduced to zero, you won’t receive a tax refund but at least won’t owe any taxes.
Examine any new tax credits you may be eligible for as they frequently change. Alternatively, you could want to begin preparing now for tax credits to claim during the upcoming filing season. Taxpayers can benefit from greater environment-related credits from the Inflation Reduction Act for the tax year 2023, for instance (affecting the tax filing season of the following year).
Purchasing an electric vehicle, installing an electric heat pump, or putting solar panels on your house are just a few examples of things that qualify for new or extended tax credits, according to Wealth Wise Financial Services CEO and founder Loreen Gilbert.
People have time to prepare because these new tax benefits are in effect for eight to 10 years, she argues. “Be sure to double-check the tax credit and your eligibility before making any purchases,” the advice goes.
Use Health Savings Accounts
Gilbert and Hamasaki both advise opening a health savings account to save money on taxes while preparing for future medical costs (HSA).
If your high-deductible health insurance plan satisfies the IRS requirements for the relevant tax year (for instance, a minimum deductible of $1,500 and a maximum annual deductible and other out-of-pocket expenses of $7,500 for self-only coverage for 2023), you are eligible to make pre-tax contributions to an HSA. You now have a lower taxable income.
Then, when used for qualified medical expenses, that money can grow tax-free and you can withdraw it tax-free as well.
The same is true if your employer provides a flexible spending account (FSA), which you could use to set away pre-tax funds annually to cover certain healthcare costs. The ability to rollover funds from year to year is constrained for FSA funds.
Yet, with proper planning, you can lower your taxable income using these kinds of accounts, which might ultimately result in a bigger tax refund.
You can also check out these Articles
- your tax return
- IRS Publication 525
- IRS Tax Rates 2023
- Get IRS Tax Refund
- Get your tax refund
- IRS Tax Refund 2023
- IRS PTIN Renewal 2023
- Increase Your Tax Refund
- Smaller Tax Refunds in 2023
Increase Retirement Contribution Amounts
Making the most of your retirement contributions is another method to boost your tax refund while long-term saving money. Your taxable income can be decreased while your retirement portfolio grows by contributing to an account like a 401(k) or individual retirement plan (IRA).
The more you can put away in the accounts you’re qualified for, up to the applicable maximums ($22,500 for 401(k)s for the tax year 2023, for example), the more money you can keep out of the IRS’s hands.
The exact savings will depend on your tax rate because these contributions are often treated as deductions rather than tax credits. You may get a partial tax credit, though, if your income isn’t high enough to qualify for the Retirement Savings Contributions Credit.
When you file your taxes online with TaxSlayer, you can optimize your refund. Alternatively, you can start by looking into some of the other online tax preparation services in the table below.
The Final Word
There are many more ways to boost your tax return this year and in the years to come, even though these are some of the finest ways to reduce your tax burden and maybe enhance your refund.
Despite this, you shouldn’t obsess excessively over tax breaks, deductions, and maximizing your refund.
“Don’t let the tax tail wag the dog,” warns an officer, adding that even if you can lower your tax payment in a given year, doing so may eventually hurt your net worth.
For instance, it might not always be wise to spend your money on something you can’t really afford only to get tax relief.
Although this is essentially a loan to the U.S. Treasury with no interest, he advises that you aim for no tax refund at all. Instead, she advises estimating your tax burden and modifying your withholdings so that you pay the appropriate amount as you go. You may do this by using your W4 or any similar form.
That being said, if you can find practical strategies to reduce your taxes while also helping yourself in other ways, like lowering your healthcare costs, then those can be worth investigating when you file your taxes or get ready for next year’s tax return. To learn how you might maximize your tax return, think about talking to an accountant or other certified tax preparation specialist.