Without any doubt, tax time isn’t fun for anyone. It is stressful to get your math right, complete the documentation, all within the tax season time constraints as well as calculating the money you owe to the IRS. On top of that, the changes t o the tax tables with Trump Tax Cuts have further increased the pain for taxpayers.
Fortunately, there are deductions, credits and tax breaks that can be applied to your situation to get a bigger tax refund. Some taxpayers might be getting small refunds because they withheld less tax from each paycheck throughout the year. The salary calculator can determine the amount of your annual salary going to your bank account and the amount towards Federal income tax, State tax, Medicare and other payments.
While taxes are uncontrollable, you can always control how big the amount of tax refund. A simple bit of tax planning, some research and forethought can help you lay the groundwork for bigger tax refunds.
Here are some of the tips to boost the tax refund:
Adjust the withholdings
The amount of money withheld from your paycheck each pay period depends upon the information you provide on IRS W-4, the form that tells your employer how much to deduct from your paycheck for taxes. The calculation is based on the number of exemptions claimed by you. More the exemptions claimed, less the money withheld for taxes.
Though reducing allowances will increase the taxes withheld from your pay resulting in bigger refunds but you will get smaller paychecks throughout the year.
Review filing status
Filing options such as Single, Married Filing Jointly, Married Filing Separately, Head of Household and Qualified Widow(er) with Dependent Child can influence the amount of money to receive in your refund. The choice of right filing status can help you reduce your tax obligations and get a bigger tax refund.
For instance, some married couples are better off filing the tax separately when one spouse has many out of pocket medical expenses.
Maximize IRA Contributions
The most recommended way to increase your refund is to make increased contributions to your retirement account or traditional retirement plan like 401 (k) as you owe no taxes on these contributions. All the funds in these accounts are tax-deferred until you withdraw them in retirement.
More the contribution to IRA, less the income subjected to taxes. Generally, the less you owe in taxes, the larger the refund.
Deduct all charitable payments
You can deduct the value of donations you have been generously giving to charitable organizations throughout the year, from your taxable income which could increase your refund check. Not only this you can also deduct the cash value of physical donations like clothing, electronics, art or real estate. Even if you have bought balloons for the charitable event you can save the receipts and deduct that purchase as a charitable contribution. Moreover, you can deduct the mileage used to drive your car as a volunteer for charitable organizations.
One thing to keep in your mind though, you have to itemize your deductions in order to deduct charitable donations.
Include dependent care deductions
Taking care of the kids as well as the aging parents can lead to huge expenses and some of these expenses can be deductible. You can reduce your tax liability if you are paying someone to take care of your kids, elderly relative or parents while you are at work, thus increasing your refund through the Child and Dependent Care Credit. This credit is subtracted from the final bill and not from your taxable income.
Tax credits work better than deductions as a refund booster because they are dollar for dollar reduction for your taxes. You can get a detailed breakdown of your payments annually, monthly, weekly and daily with the salary calculator.
The above-mentioned tips can help you receive larger annual tax refunds as a way to save money for big purchases or just to enjoy bigger chunks of cash. A huge tax refund can give you the feeling of Christmas in the springtime, make sure to spend it wisely.