9 Tips for Getting the Biggest Tax Refund Possible
There is something deeply satisfying about receiving a big, fat refund from the IRS.
Your boss withholds a big slice of your paycheck each month for federal and state income taxes, and now is your chance to get some of that cash back.
If your goal is to get the biggest tax refund possible, follow these 9 tips:
When you start a new job, the human resources department has you fill out a W-4 form to determine if you’re single, married or have kids.
The more people in your household, the more allowances or exemptions you can claim.
If you want to increase your odds of receiving a refund in the spring, tell human resources to drop one of your exemptions and withhold more money each month.
Deduct all donations
Itemized deductions are a great way to lower your taxable income.
The IRS allows you to deduct up to 50% of your taxable income in charitable contributions to tax-exempt organizations.
Those include religious organizations, community groups, charitable organizations, colleges, nonprofit hospitals and more.
Deductible contributions include money, personal property, stocks and securities, and even expenses incurred while volunteering.
Bonus tip: to track your donations throughout the year to help maximize your deduction for cash, non-cash and recurring donations at tax time, download the Donation Assistant® by TaxACT .
Another useful itemized deduction is for job-related expenses. If you pay out-of-pocket expenses related to your job — and your boss doesn’t reimburse you — you can deduct those costs from your taxable income.
Examples include cell phones and laptops for work, dues to professional organizations, uniforms and work clothes that you don’t wear off the job, and mileage traveling to meet clients (sorry, your daily commute doesn’t count).
Review your filing status
The IRS offers different standard deduction amounts to different income tax filing statuses.
In general, married couples who file jointly can claim twice the standard deduction of single filers and married couples filing separately.
If you’re a single filer, check the criteria for head of household filing status, which will give you a larger deduction.
Don’t forget familial obligations
You can deduct a number
of expenses related to your immediate and extended family.
If your child goes to daycare so you and/or your spouse can work, you can deduct the daycare costs from your taxable income
The same is true for expenses related to the care of an elderly parent or relative. If you pay alimony to an ex-spouse, that’s deductible, too.
Many out-of-pocket medical expenses for your family are deductible, but not health insurance premiums.
Increase IRA contributions
You can deduct all contributions to a traditional IRA if you are not also covered by a retirement plan at work.
The annual contribution limit in 2014 is $5,500 ($6,500 if you’re over 50). Note that higher income earners can only deduct a portion of their IRA contributions.
Refinance your home
The IRS allows you to deduct all interest paid during the year on a home mortgage.
By refinancing your mortgage, you restart the payment process, meaning that a greater part of each mortgage payment is pure interest.
More interest means more deductible income.
Use current tax laws
Congress is always tinkering with the tax code in order to encourage different types of positive economic and social behavior.
You can earn tax credits, for example, by making energy-efficient upgrades to your home or buying a hybrid vehicle.
Subscribe to the TaxACT blog. and also visit taxact.com/taxinfo. to keep track of all the latest tax law changes that could boost your refund.
Start a home business
If you run a small business out of your home, you can deduct portions of your home expenses used exclusively for the business, like Internet service, telephone service and even the percentage of the mortgage or rental payment taken up by your home office.
In 2013, the IRS began offering a simplified option for the home office deduction in which taxpayers multiply a standard rate by the square footage of their work space.
Do you currently do any of these tips to get the biggest tax refund possible?
TaxAct Free Federal Edition finds all the deductions and credits you are entitled to for the largest possible refund. It’s the most complete free tax filing solution for everyone. Start free now or sign into your TaxAct Account .Source: blog.taxact.com