6 Tips for Getting the Biggest Tax Refund
Did you know that in 2015, 75 percent of tax payers received refunds of up to $2,800? Getting a refund of this magnitude doesn’t happen by chance; tax payers need to take a strategic approach. No matter if you do your taxes yourself or work with a preparer, consider these tips:
Reduce the Number of W-4 Exemptions
This strategy isn’t a tax season quick fix. Rather, at least a year in advance, go to your company's HR department to reduce your number of exemptions, which results in more money withheld from every paycheck.
Calculate Charity Deductions
Are you a giver? If you’ve donated to a nonprofit with 501(c)(3) tax status, meaning that charitable activities are exempt from federal tax, you may be eligible for substantial savings. The amount depends upon how much you gave and whether you can back it up with receipts.
Do you pay for on-the-job equipment, supplies and business trips? The small things, like union dues, a company phone and mandatory trade publication subscriptions, all add up. At the end of the year, you can write them off after you’ve totaled your expenses.
Expenses Related to Family Members
Can you claim certain individuals, such as children and elderly adults, as dependents? In most cases, you're paying for the cost of caretaking and their medical care. After you have a total, you can write those expenses off for a refund.
Another long-term change, contributing more to your IRA lowers your overall taxable income. Since you now have less income to be taxed, you could be eligible for a greater refund.
Additionally, certain programs like the Savers Credit may yield refunds up to $1,000. The Savers Credit gives a special tax break to those who are saving for retirement and are at a low to moderate income level. The amount you receive depends on your total income and how much you contribute to your 401(k), IRA or other retirement plan.
Other Tax Credits
If you're eligible for certain tax credits, you might further increase the value of your refund. These may include:
- Credits for making energy-saving improvements to your home
- Credits for purchasing a hybrid vehicle
- American Opportunity Tax Credit
- Programs targeted toward students, including credits up to $2,500 for those attending college or a vocational school
- Credits for those paying off student loans
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