A tax refund is a beautiful thing. Essentially it’s your government telling you that you’ve given them too much money in tax season based on your personal financial circumstances. And that extra sum will be returned to you as quickly as they possibly can.
Many people use their tax refunds to help them make larger purchases later in the year, save for a vacation, or just help pad out their savings on a yearly basis. Of course, your financial hygiene has a lot to do with how big your tax return will be. To make sure you get every penny owed to you, make sure to follow these tips:
Donate To Charitable Organizations
Instead of throwing out all of those old clothes you don’t wear anymore, consider making an itemized list of the items and then giving them to a registered charity. So long as you have records of what you’ve given away and their value, you can deduct this value from your overall tax burden and receive it as part of your return later in the year. Of course the burden of keeping meticulous records largely falls on you but this is perhaps one of the easiest ways to reduce your tax burden as well as do a little bit of spring cleaning at the same time.
Always Keep Meticulous Records
You can only get extra money on your Tax Refund if you can prove to the government where your money went. That means keeping receipts of all financial transactions you make during the year so they’re available to you or your accountant when it comes time to file. Things like contracting expenses, loan interest expenses, as well as medical bills are all things that can help reduce your overall tax burden. If you use a tax calculator like the one provided by Taxfyle, you can quickly see how each of these transactions can boost your possible refund in real time. Note that most calculators are just estimates as tax codes can vary wildly year per year.
Put Money Away Towards Retirement
Money contributed to a 401k plan is contributed before deductions and reduces your overall taxable income. An IRA functions much in the same fashion. There is a limit to just how much you can use as a deduction each year, of course. At the same time, this limit is usually in the five figure range which means some significant savings are possible on your overall tax burden while also helping you put money away for your future. This also helps ensure getting a good Tax Refund.
Maximizing your tax refund is a great way to make sure you have some extra scratch moving forward into the new year. The government wants to help people who are making what they consider to be the “correct” financial choices. As long as you make sure to understand what the government considers a worthwhile way to spend your money that reduces your tax burden, you can weaponize that information to increase how much money you’re owed come tax season. Thousands of people leave money on the table just by not keeping detailed financial records, you’d be surprised what you can claim.