Everyone who earns a certain income level deals with personal taxes but it doesn’t have to be depressing. There are many ways to legally reduce taxes and receive the greatest possible refund. With the advent of the IRS’ online Refund Status tool, it’s possible to track refunds in real time. Staying up-to-date on new tax laws can be accomplished with software and can also help lower taxes.
The following tips will help you maximize the tax refund opportunities:
1. Plan Taxes Early. Taxpayers should begin planning taxes at the start of each new year and make projections on annual income and expenses, which helps to evaluate refunds.
2. Change Exemptions. The lesser exemptions a taxpayer claims on their W-4 form, the more he or she will get back in their refund. This adjustment can be made by the employer’s department of human resources.
3. Donate to Charity. Donations to a 501 (c) (3) nonprofit organization can help lower taxes as long as the taxpayer was given a receipt, although certain limitations may apply.
4. Deduct Expenses. Certain work expenses can be deducted from income, if the employer does not reimburse employees. Some of these expenses include equipment, magazine subscriptions and phones.
5. Deduct Child Care. Expenses on family health plans and care for dependents such as children and parents can be deducted, as can alimony payments.
6. Refinancing Home. When a homeowner refinances their home and pays more in interest than principal, it’s an opportunity to increase tax deductions on interest payments.
7. Remodeling Home. The government provides tax credits to homeowners for retrofitting a home to become more energy-efficient or eco-friendly. There may be additional credits for purchasing hybrid or electric vehicles.
8. Check Filing Status. Married couples have the option of filing a joint return, which can provide bigger refunds than filing separately, unless they have many financial liabilities.
9. Increase IRA Contributions. By increasing contributions to an IRA account without exceeding the maximum limit, one can increase deductions.
10. Launching Home Business. There are many tax write-offs for entrepreneurs, such as office space, supplies, internet and phone.