The time is upon us. Tax season is in full swing and millions of Americans are looking at how they can avoid paying more than they owe or even looking at how to boost their refunds. There are a number of things that anyone can do to try and reduce their tax liability. Here’s a look.
- Reconsider your filing status. If you are married, you, like most couples, will probably file jointly. That may not always be the most advantageous filing status. While filing separately will require more work, it may result in a higher refund than if you file jointly. If you or your spouse spends a lot of time traveling with a job, there may be traveling expenses that can help to maximize a refund.
- Make the maximum contribution to your IRA. If you haven’t opened an IRA, do so by April 15th and invest the maximum amount. Your IRA contribution reduces your taxable income and, ultimately, your tax liability.
- Timing is everything. You can increase the likelihood of a larger tax refund by paying your January mortgage payment in December of the previous year. Doing so adds the interest paid to your previous year’s mortgage interest deduction. You can do the same with health exams and treatments to raise your medical expense deduction. Paying your property taxes on Dec. 31 might give you the necessary deductions to itemize and receive a larger refund.
- Educate yourself on tax credits. Too many people do not claim the earned income tax credit (EITC). If you work and meet the guidelines, you might be eligible to receive the credit even if you do not have kids. Those with college-age children need to learn about the American Opportunity Tax Credit as well as the Lifetime Learning Credit.
- Understand tax deductions and use them. Keeping track of your business travel may be the difference in a larger refund. Any gas, toll, or parking receipts can support your claim and allow for miscellaneous deductions, which can raise the amount of your refund. Charitable deductions can also help your refund. Always get a receipt for your donations and use your charitable giving to reduce your tax liability. Moving is also something that can help boost a tax refund since all moving, storage, and travel expenses are deductible.
Following these five tips or any of them individually can help anyone reduce their tax liability and ultimately lead to a higher tax refund. If you find you cannot reduce your tax liability and owe the IRS money, consult Embassy Loans for a car title loan, a short-term loan that can help you pay your tax bill.