Four Ways to Boost Your Tax Refund Next Year

tax refund computation

It’s not always that you get a windfall. It is rare unless you win the lottery or you receive an inheritance from a distant relative. Every year, you get a small windfall from your taxes, though. Does that constitute a windfall? It depends on how much you’re getting. The Internal Revenue Service (IRS) said that in 2017, they issued $111.9 million in refunds. That’s an average of $2,895 per taxpayer. Now, you may think that “how come I’ve only gotten $800?” Remember, this is not a hard-and-fast rule. There’s a reason why other people get more from their tax refunds.

1. Get a Professional to Help You

The first rule always is that if you don’t understand what’s happening with your taxes, don’t try to do them on your own. You can have a tax professional help you for less than $150. Plenty of tax-service companies offer specialized services and products for specific industries. There’s even a tax preparation service for truck drivers since they don’t always have the time to keep up with their daily accounting needs. They are one of the most vulnerable workers when it comes to filing tax returns and maximizing their possible tax refund.

A professional will guide you—from your filing status to tax deductions to the timing of your tax filing. There are so many things about tax filing that ordinary people don’t understand. Even if you’ve been successful in filing your taxes for decades, chances are that you are missing out on a lot because you are not consulting with an expert.

2. Rethink Your Filing Status

Are you and your spouse filing taxes jointly? More than 95% of married couples file taxes jointly, but that may not always be the most beneficial option if you want the most out of your taxes. If one of you has a lot of medical expenses, you should file separately because that will allow for a larger deduction. The same goes if one of you becomes unemployed during the last fiscal year. Filing individually is the more practical option.

The Child Tax Credit is another reason why you and your spouse should file separate taxes. You can claim a $2,000 credit per child under 17 years old. If you have less than $200,000 in adjusted gross income, you can claim this tax credit. And because of the pandemic, through the American Rescue Plan, that tax credit is up to $3,000 to $3,600 per child for your 2021 tax return.

3. Maximize Tax Deductions

There are many deductions that you may not be fully aware of. This is why it’s important to talk with a tax professional regarding the deductions you are qualified to get. If you work these deductions into your tax payables, they will deduct a significant amount from it. The most commonly overlooked tax deductibles are state sales tax, reinvested dividends (include reinvested dividends from mutual funds in your cost basis), out-of-pocket charitable contributions (even the small ones), student loan interest (even if you are not the one paying the loan), and child and dependent care (you can get up to $6,000 in deduction).

If you are a working parent who has dependent children, there are more tax deductibles for you. The earned income tax credit is for low- and moderate-income families while the state income tax paid on last year’s return can be an itemized deduction (if you are doing that). You can also use certain jury duty fees, medical miles, and charity miles to slash the amount of taxes you have to pay.

4. File at the Right Time

By paying for the mortgage and medical expenses before the end of the year, you can declare those expenses in your tax returns. Thus, you will have more tax deductibles. Since everyone has a home office now, you might even be able to deduct the cost of refurbishing your work-from-home space. That means doing the renovations before the fiscal year ends since only expenditures up to December 31 can be declared in your tax returns. In short, look for expenditures that you can claim before the year ends, so you can include those in your tax return for that year.

Taxes are always tricky, but you have to make an effort to understand how they work. Even if you have a professional working with you, it’s important to know how much you can save. This way, you will know what to do next year. On your own, you will have the capacity to spend on things that you can declare as an itemized deduction and avoid filing for the wrong items.

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