How to Maximize Your Tax Refund
No one wants to pay more than necessary when it comes to their state or federal taxes. Ideally, everyone would receive a refund on their taxes. Accountants specializing in tax preparation in Union City, NJ are regularly asked the best ways to get the most back with a tax refund. We advise our clients to take the following steps to maximize their refund.
Adjust your filing status
Married couples assume they have to file a joint tax return each year, but that is not the case. Switching to the Married Filing Separately status may increase your tax refund. The Internal Revenue Service decides if a deduction can be claimed based on the percentage of your adjusted gross income (AGI). If a married couple files separately, you individually have a lower AGI than if you filed jointly, making it easier to claim certain deductions. However, you’ll want to consult an expert on tax preparation in Union City, NJ before filing separately to make sure the benefits outweigh the costs.
For unmarried individuals with a qualifying dependent, you should look into filing your taxes as the Head of Household. This status provides a higher standard deduction and a better tax bracket than if you filed as Single. Don’t forget, a qualifying dependent can be a child who lived with you for more than six months, but also an elderly parent for whom you provide more than half of their financial needs, even if the parent does not live with you.
Consider all deductions possible
Far too many people shy away from taking deductions on their taxes. They worry claiming deductions instantly leads the IRS to audit them, but that is not the case. If you are going to claim deductions, be sure to keep records in case the government wants to look deeper into your tax return. Deductions you can claim include:
- Any miles you drive for a qualified nonprofit or for medical reasons
- Money donated to charitable organizations
- Market value of in-kind donations (home goods, clothing, cars, etc.)
- The cost of any materials or supplies you need to do volunteer work (like if you printed posters for a nonprofit, you could deduct the cost of the paper and ink)
Contribute to your IRA and HSA
Interestingly enough, you can actually open an IRA or contribute to an existing one by April 15 of the year you are filing for. So, for instance, you have until April 15, 2020 to open or contribute to an IRA for your 2019 tax filings. These deposits lower your taxable income. Contributions to a Roth IRA qualify for a Saver’s Credit instead of a deduction.
Any after-tax additions to your health savings account (HSA) also minimize the income that can be taxed. It applies to opening an HSA as well. Similar to your IRA, you have until April 15 to make HSA contributions that will apply to your taxes for the previous year.
An experienced, knowledgeable accountant will be familiar with other methods to maximize your tax refund. Those looking for assistance with tax preparation in Union City, NJ trust Kedean’s Generation to maximize their refund. If you want to discuss how we can help you with your upcoming tax returns, schedule an appointment today.
Categorised in: Tax Preparation