While you are employed, you typically have taxes taken out every paycheck and then have to file at the end of the year to pay the remaining. If the amount you owe is less than the amount you paid, you will be entitled to a tax refund. There are many situations and circumstances that can affect how much you owe at the end of the year. These are four areas where you can increase your tax refund.
- Rethink your filing status.
One of the most important decisions to make financially after marriage is how you will file your taxes. How you file can affect the amount of your refund significantly. Even if you are married, filing a joint tax return may not be the best option in terms of a refund. one partner has high medical bills or more financial expenditures from which taxes are deducted, it may be better to file individually. Filing status can also affect tax credits, which we will look at later.
If you are unmarried and living alone and are a qualified dependent, you should file yourself as the head of the household, which always increases your standard deduction and lowers your tax rates.
Try calculating your taxes using both filing statuses if you qualify for more than one; that way, you can see the refund amount before you submit your return officially to the IRS. These are your options.
- Single
- Head of household
- Married, filing jointly
- Married, filing separately
- Qualifying widower
- Itemized or Standard Deductions?
In most cases, itemized deductions will result in a higher tax refund. However, it requires keeping a perfect track record of all of your expenses and turning in all of your receipts at the end of the year. It may be the best option if you make any or all of these tax-exempt purchases:
- Financing a home
- Charitable Donation
- State Property Taxes
- Medical Expenses
- Purchases for work
If you find that you don’t want to keep track of all of your receipts or that you won’t really benefit from itemized deductions, the standard tax deduction is a deduction that is set by the Internal Revenue Service and is based on a summary of your income and purchasing history that year.
- Look carefully for tax credits.
A tax credit is motivation for the individuals to pay their taxes. It allows specific taxpayers to deduct the sum of the money they may have accumulated from the total sum of the money they owe the IRS. You should pay extra careful attention when filing your taxes to any tax credit that you may be suitable for. Tax credits are sometimes considered more beneficial than tax reductions. Although tax deductions only decrease your tax bill infraction to your tax rate, tax deductions deduct straight from your tax bill total. Refundable tax credits are considered the most profitable as they can offer a refund in addition to deducting from the tax that you owe.
These are two of the most popular tax credits:
- Earned Income Tax Credit (EITC). EITC helps those individuals or families that are self-employed or have average to low income. It is based on an individual’s reported income for the year.
- Child and Dependent Care Credit: This helps individuals carry for a child or elderly adult and is also based on income.
- Hire a professional accountant if necessary.
Tax laws are confusing and complicated. You can try to find a professional tax accountant who can take care of your taxes’ complexities. A professional can also help you find the deductions and credits that can maximize your funds. Sometimes companies offer free tax help and just take a small percentage out of your refund. There are even free clinics and community resources available for people who meet certain income requirements.
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