8 Smart Moves to Make Right Now to Maximize Next Year's Tax Refund
A tax refund is a sum of money that is returned to a taxpayer after they have overpaid their taxes. The refund is calculated based on the individual's tax liability, which is the amount of taxes owed minus any tax credits or deductions. Tax refunds are typically received within a few weeks of filing a tax return, and they can be used to pay down debt, cover unexpected expenses, or boost savings. For many taxpayers, a tax refund is a welcome windfall that helps to improve their financial situation. Are you looking forward to your tax refund next year? If so, there are a few things you can do right now to make sure you get the most out of it. In this blog post, we will discuss some smart moves you can make right now to maximize your refund for next year. By following these tips, you can ensure that you get the most money back from the government!
1. Increase Your Tax Withholding
By increasing the amount of taxes withheld from your paycheck, you can ensure that you won't owe any money come May 15th. And if you end up getting a refund, it will be larger than it would have been otherwise. So if you're looking to get the most out of your tax return, consider increasing your withholding. It's a simple way to boost your refund while also ensuring that you don't end up owing the IRS.
2. Max Out Your IRA or 401(k) Contributions
Making the most of your IRA or 401(k) contributions can help you maximize your next year's tax refund. By contributing the maximum amount allowed each year, you can lower your taxable income and potentially qualify for a larger refund. Additionally, if you are able to contribute to both an IRA and a 401(k), you can further reduce your tax liability. If you're not sure how much you can contribute, be sure to talk to a financial advisor or tax professional. With a little planning, you can maximize your chances of getting a big refund next year.
3. Claim The Saver's Credit
The saver's credit is a tax break for low- and moderate-income workers who save for retirement. The credit is worth up to $1,000 for an individual or $2,000 for a couple. To qualify, you must be at least 18 years old, not a full-time student, and not claimed as a dependent on someone else's tax return. You also need to have earned income from a job or self-employment. IRA contributions can also count towards the credit. If you meet all the requirements, you can claim the credit when you file your taxes. The saver's credit can help you maximize your next year's tax refund. By contributing to a retirement account, you can reduce your taxable income and potentially get a bigger refund. And if you're eligible for the saver's credit, you can boost your refund by even more.
4. Review Your Filling Status
One of the best ways to ensure you are getting the most money back on your tax return is to check your filing status. There are many factors that can affect your filing status, such as whether you are married or single, have children, or own a home. If you are not sure which status applies to you, there are many resources available online that can help you figure it out. Once you know your filing status, be sure to check the IRS website for tips on how to maximize your refund. By taking a few minutes to review your options now, you can save yourself a lot of money come tax time.
5. Claim the Earned Income Tax Credit
According to the IRS, the Earned Income Tax Credit, or EITC, is a tax credit for certain people who work and have earned income below a certain amount. The EITC reduces the amount of taxes you owe and may also give you a refund. To claim the credit, you must file a tax return, even if you do not owe any taxes. The amount of the credit varies based on your income and family size. You can use the IRS's EITC Assistant tool to see if you qualify and estimate how much the credit could be worth to you. If you think you might be eligible for the EITC, be sure to claim it when you file your taxes next year. It could mean a bigger tax refund for you!
6. Start a Side Hustle
One way to reduce your tax burden is to start a side hustle. This can be anything from dog walking to freelancing to selling products online. By earning additional income, you'll be in a lower tax bracket and may even qualify for certain deductions. And if you're self-employed, you can deduct a portion of your business expenses on your taxes. So if you're looking to maximize your tax refund next year, consider starting a side hustle. Not only will it lower your tax bill, but it could also provide some extra spending money. And who knows, your side hustle might even turn into a full-time business.
7. Claim Your Dependents
One of the best ways to maximize your tax refund is to claim your dependents. By including your spouse and children as dependents on your tax return, you can reduce your taxable income and receive a larger refund. In addition, if you have other family members who rely on you for financial support, you may be able to claim them as well. Althoughdependents can provide a significant tax benefit, it's important to make sure that you are eligible to claim them before doing so. Otherwise, you may end up owing money to the IRS. When in doubt, it's always best to consult with a tax professional to ensure that you are taking advantage of all the deductions and credits that you are entitled to.
8. Look for Lesser-Known Credits
Many people are unaware of the many credits and deductions that they may be eligible for come tax season. By taking the time to do some research, you may be able to maximize your tax refund next year. For example, did you know that you can get a credit for installing energy-efficient appliances in your home? Or that you can deduct the cost of charitable donations? There are many different credits and deductions available, and it's well worth taking the time to look into them. With a little bit of effort, you can ensure that you get the most money back from your taxes next year.
