8 Ways You Can Boost Next Year’s Tax Refund Now
Tax season is a stressful time of the year. Most people are scrambling to put together their finances and take care of everything they’ve neglected to do throughout the year. With the new amendments to the U.S. tax laws, rates, and brackets, more people than ever are hiring professional accountants to help get the most out of their tax refund. Rather than wait until tax season comes around, here are 8 ways to boost next year’s tax refund now.
1. Always Keep Track of Deductions
This is the number one thing you can do to boost next year’s tax refund. There are so many people that wait until the last minute to put together all of their tax documents, including deductions. Saving everything until last minute will inevitably lead to more than a few missed opportunities. Instead, you need to keep track of deductions, all the time. To help you do this throughout the year, create a file and label it. Make it specifically for tax deductions and consistently update it. To make the most out of your time, schedule an “appointment” with yourself at the end of every week to update your tax documents and file them accordingly. We recommend using an excel spreadsheet or something similar to separate each type of deduction and create an easy to read document that can be revisited time and time again.
If you haven’t been doing this all year, now is the time to get organized. Start going through your expenses and deductions from January until now. This will give you some time to think about your deductions and make them as comprehensive as possible before it’s time to file your taxes.
To get the most from your income, take the time to research all of the potential tax deductions you can file in your current job. If you’re driving anywhere, don’t forget to track your mileage. While most people know you can write off business-related miles, it’s lesser known that miles driven for charitable events or medical needs are also deductible. The rates are a little lower, but they still count.
2. Increase Your Savings
Another way you can boost your tax refund for next year is to increase your savings. By investing in your retirement now, you’ll owe less in taxes each year. If you haven’t been making regular contributions to your IRA or HSA accounts, start doing so now. Putting money into your IRA will reduce your overall taxable income, which could mean the difference between a higher or lower tax bracket. Try to take advantage of the benefits you get from making the maximum contributions per year to see the biggest affect on your tax refund. Just make sure that you won’t need the money in the near future, as taking it out early will result in fines and higher taxes. Take advantage of the fact that you can contribute to your savings accounts for 2019 up until it’s time to file taxes in 2020. The maximum for most people making contributions is around $19,000 per year. If you’re 50 or older, you may be eligible for contributions up to $25,000. Talk to your accountant today to make sure you’re making the most out of your retirement planning.
If you’re self-employed, consider opening a Simplified Employee Pension Plan (SEP). This will allow you to make contributions of up to 25% of your total net earnings. It’s capped at about $55,000, but every contribution is considered a deduction so you can greatly reduce your overall taxable income.
If you have a Health Savings Account (HSA), you can make a number of pre-tax contributions to help you boost your tax refund. Prior to contributing to an HSA, talk to your accountant about whether or not you meet the requirements.
3.Double Check Your W-4 Withholding Allowances
If you’ve continually owed money on your taxes come tax time, double check your W-4 withholding allowances. You might be withholding too much for each paycheck, which results in a larger tax debt owed. If you reduce your W-4 withholding allowances you’ll pay more per paycheck, but you won’t have to write a check come tax season. It’s always better to withhold less and end up with a tax refund than withhold too much and have to pay it back. Adjust your withholding allowances as needed until you find the balance that works best for you.
4. Consider Changing Your Filing Status
When people get married, they automatically start to file joint taxes every year. This, however, is not always the best way to file. Depending on your situation, you might benefit more from filing separately. This will take a lot more effort, but you could save hundreds or thousands of dollars if it’s done right. If either you or your partner have incurred a substantial amount of medical expenses over the 2019 year, filing separately will give the person with medical expenses a much larger deduction than if you were to file jointly.
If you choose to file separately, there will be a few drawbacks so you need to weigh your options and opt for the filing status that will give you the best results. For help, we recommend hiring a professional CPA.
5. Boost Your Knowledge
Have you been considering going back to school or learning something new? Now is the perfect time to take initiative. Updating your skills, furthering your knowledge, or spending money on career development are all ways you can use Earned Income Tax Credit or Lifetime Learning Credits to your advantage. If you’re eligible, you’ll be able to claim roughly 20% of your educational expenses. This is capped at $2,000 for each tax return, but it’s still a beneficial way to boost next year’s tax refund while simultaneously bettering yourself. To learn more about whether or not you’re eligible, talk to your CPA today.
6. Contribute to Next Year
If you have a mortgage payment and are capable of making January’s payment in December (sometime before New Year’s Eve), you’ll get additional interest for your overall mortgage interest deduction. The same concept applies to doctor’s visits or exams.
7. Be Charitable
‘Tis the season of giving! This is the perfect time of year to give back to your community. Clean out your home and make a pile of things you no longer need or want and take them to Good Will or another thrift store. You’re charitable donations are deductible and are going towards a good cause. If you volunteer at any shelters, food banks, or other charitable institutions, don’t forget to track your mileage or any expenses or donations you make that contribute to the cause.
8. Hire a Professional
The best way to maximize next year’s tax refund is to hire a professional certified accountant. Doing so will help make sure that done everything possible to file the lowest taxable income with the biggest refund. Find a professional accountant you can trust and consider working with them year round.
If you’re looking for a professional accountant to help you boost next year’s tax refund, give us a call at Del Real Tax Group. All of our professional accountants work to make sure that each and every one of our clients gets the best individualized attention possible while saving thousands of dollars in taxes each year. Stop overpaying for your taxes and start your tax planning strategy early. Visit our website or call us today at 708-788-0082.
Maribel Del Real, CPA
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