5 Tips to Maximize Your Tax Refund
It’s the most wonderful time of the year: Christmas in spring—or at least it feels like it with tax returns.
Whether you’re looking to splurge on a vacation or settle some old debt, the money returned to you after filing your taxes may be your answer. But at the end of the day, you want to maximize your returns and maybe extend your vacation for a day or pay off a little more debt than expected.
To get a little extra cash in your pocket this year, consider these five simple tips when filing your taxes:
Think About Your Filing Status
While 96 percent of married couples file taxes jointly, filing them separately might give you a higher return. The IRS uses a percentage of your adjusted gross income (AGI), or your taxable income, to determine whether some expenses can be deducted.
For example, if you lost your job this past year and racked up a few medical bills with COBRA, some of these expenses might be deducted with a lower AGI. On top of that, if you looked for a job during this time, expenses like resume preparation and networking can be deducted.
But you must weigh your options, whether it’s best for you to file jointly or separately. If you file separately, you might lose some of the joint filer credits.
Add in Tax Deductions
Deductions like moving expenses and charitable donations are often overlooked, but they offer substantial tax savings, which in turn can maximize your refund.
Keep records of your travel expenses. Traveling to volunteer work, doctor’s appointments or a job interview represent miscellaneous deductions. An up-to-date travel log with recorded miles, bus tickets or taxi receipts will help you reach the needed minimum percentage of AGI for miscellaneous deductions.
Did you move away 50 miles or more for a job last year? If you’ve worked full-time at the new job for over 39 weeks, you can deduct moving, storage or travel expenses. And luckily, you don’t have to itemize this deduction. Simply use Form 3903 for your total expenses.
Your generosity toward the community can be deducted, too. In order to claim charitable donations, such as cash or clothing items as itemized deductions, ask the 501(c)(3) nonprofit for written acknowledgement. In addition to charitable donations, your contributions can be deducted. For example, if you baked goodies for a nonprofit’s fundraiser, the ingredients you purchased to make them can be deducted.
Increase IRA Contributions
Contributing to your retirement savings account is a great way to plan for the future, but it’s also a great way to maximize your tax return.
The more money you put into your IRA or 401(k), the lower your AGI. And with a lower taxable income, the less you’ll owe in taxes, which equals a bigger refund. If you don’t have a retirement savings account, you have until April 15th to open one for the previous year.
Don’t File an Extension
Plain and simple: don’t do it. If you owe money on your taxes, filing an extension doesn’t mean more time to pay. Interest will build on what you owe, and you may even have to pay a penalty.
TurboTax is on your side and wants to help you get the biggest refund possible. Plus, as an IBMSECU member, you can receive a discount of up to $15 on TurboTax federal products.
Don’t delay, file your taxes today to avoid any penalties and to maximize your refund.