Taxes. They are arguably one of the most inconvenient realities we all face if we live and work in the US. For many Americans, the tax due date is a looming horror because of the threat of big payments on taxes owed. For others, the April tax deadline might imply good news, promising big returns. In either case, there are ways you can avoid a hefty tax bill, or squeeze even more out of your tax refund. If we’ve piqued your interest, read these tips about how to get the most out of your next tax return.
Hire a Tax Professional
Not everybody is great with money, and even fewer people are wizards with numbers. If you can relate, you may improve your tax return outcomes by hiring a professional. A CPA (certified public accountant) or tax consultant is an expert in tax law. They can find you credits, help with deductions you can take, and find ways to get you the most out of your next tax return. A simple internet search for “accountants near me for taxes” will yield many results. Investigate different tax pros, and read their reviews to select the right accountant for your needs. A professional tax preparer is one of the most effective ways to win big during tax season.
Invest In Your Retirement
Many Americans might not realize this, but investing in an IRA is a tax shelter that can help reduce tax payments in any given year. You can get a tax deduction for however much you contribute to a traditional IRA up to the $6000 current limit. While actual deduction and contribution limits depend on your adjusted gross income, investing in an IRA is a great way to keep your money and avoid paying income taxes.
Adjust Your Withholdings
If year after year you find yourself paying high taxes, then you may need to adjust your tax withholdings. Employees have the option to change how much is taken out of their payroll checks. Increasing the amount of taxes going to state and federal taxes can help you avoid paying a big annual tax bill.
Consider Relocating
This might seem like a drastic tip, but you might want to think about moving to another state in order to save on taxes. Tax refunds by state can vary wildly. For instance, if you live in New York or California, you can expect to pay far more in state taxes than, say, states such as North Dakota or Indiana, which have the lowest state tax rates. Moreover, you could consider moving to states that have no state income tax, such as Texas, Florida, or Washington.
Be Charitable
If you don’t itemize your tax return, you can claim a deduction of up to $300 for donating to qualifying charities. If you are married and filing jointly, the deduction you can take is $600. These are the current tax deductions for charitable contributions, but be sure to check with the IRS, as these figures may change from year to year.
Improve Your Home
You may not know this, but certain home improvements can win you some tax breaks. For instance, you can get an income tax credit for installing energy-efficient items that meet certain ratings. The government also issues a solar credit, which is currently $500 if you install solar panels in your home. These “green” home improvements may not result in whopping credits, but it’s just one more way to invest in your own interests and save on taxes.
Rethink Your Filing Status
According to a survey by the popular tax software company TurboTax, 96% of married couples file jointly each year. While it might be the popular or most common filing status – it may not be the most financially prudent option. Before filing your taxes, calculate your taxes for both filing jointly and married and filing separately. This allows you to compare the two, and choose the best filing status for your best tax return refund.
In conclusion, we hope these tips about how to get the most out of your next tax return will help you this coming tax season. Remember that even the slightest changes can reap beneficial results come tax deadline day. And even if some changes result in a huge improvement – any little bit helps for better outcomes.
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