While tax season 2019 is in full swing, it’s never too early to start looking ahead to next year and planning for the ways you can increase the size of your tax return. According to the IRS, approximately 75 percent of taxpayers received a refund in 2018, with an average direct deposit refund of more than $3,000. But there are some people who still may be leaving money on the table.
With this in mind, here are some tips that may help you increase the size of your refund.
Don’t assume the standard deduction is your best bet
With the new Tax Cuts and Jobs Act essentially doubling the size of the standard deduction, fewer people than ever before are going to bother with itemizing their taxes, especially considering many other deductions were reduced or eliminated altogether.
However, there are still some circumstances in which it can make more sense for you to itemize than to take the standard deduction, even though about 90 percent of taxpayers will now forgo the itemization process. Gather up all your receipts. If you’re close to the standard deduction threshold, there are probably some additional expenses you’re forgetting that can put you over that standard deduction limit, including charitable contributions, points paid on a new mortgage, a home loan refinance, etc.
Claim someone you’re supporting as a dependent
If you’ve been supporting a friend or family member, you can claim them as a dependent on your tax return. You’ll have to make sure they satisfy the rules regarding qualification as a dependent, but if the non-relative has lived with you for the year, does not provide more than half of his or her own support and does not earn more than $4,150 in taxable income, you can claim them.
Refundable tax credits
A tax credit differs from a deduction in that it’s a dollar-for-dollar reduction of the amount of tax you owe. For example, the earned income tax credit gives you up to $6,431 if you have three or more children, yet about 20 percent of taxpayers eligible for this credit will fail to claim it in a given year.
Contribute to retirement accounts
You have up until the filing deadline to make contributions to your IRA that count toward the previous year’s taxes, giving you the benefits of tax deductions of up to $5,500 (or $6,500 if you’re older than 50). You might also qualify for a saver’s tax credit, a credit of up to $1,000 (or $2,000 for married couples filing jointly) if you contribute to your retirement account.
These are just a few ways you can maximize the amount of money you get back in your tax return, but chances are there are plenty of other steps you can take, depending on your financial circumstances. For more information about increasing the size of your tax return, we encourage you to contact Menjivar & Company CPAs, Inc. to discuss our tax preparation services in Hayward, CA. We look forward to helping you get the most out of your return!
Categorised in: Tax Preparation