Use these tax refund strategies to ensure that Sudhir Tax is giving you the maximum amount of your refund.
Although it’s difficult to picture anyone enjoying the process of filing their taxes, the possibility of a sizable refund can make it worthwhile.
You must submit your taxes correctly in order to get the biggest refund possible. Kenneth Chavis IV, a senior wealth manager at the Los Angeles-based wealth management company LourdMurray, says, “Take advantage of any and all tax credits you’re entitled for.”
Additionally, you want to make sure your tax form is free of mistakes that could wind up costing you money. Here are some methods to prevent that and guarantee you receive the biggest refund in 2023:
- Select the right filing status.
- Don’t overlook dependent care expenses.
- Itemize deductions when possible.
- Contribute to a traditional IRA.
- Max out contributions to a health savings account.
- Claim a credit for energy-efficient home improvements.
- Consult with a new accountant.
Select the Right Filing Status
Your standard deduction amount and the income requirements for several credits and deductions are based on your filing status. Your refund may be considerably affected by the status you choose. For instance, for the first two years following the loss of their husband, a person may file as a qualified widow(er). The standard deduction that would be given to someone if they filed as single is almost doubled in this situation.
Married individuals might decide whether to file jointly or individually. Riley Adams, a certified public accountant and the founder of the website Young and the Invested, asserts that married couples are better off filing jointly 99 times out of 100 times.
Don’t Overlook Dependent Care Expenses
For each child under the age of 17, you earn a $2,000 child tax credit if you claim them on your tax return. But don’t pass up the opportunity to get a addition tax credit for your child care expenses.
You can be eligible for a credit of up to 35% of the first $3,000 spent on qualifying child care for one kid or the second $6,000 spent on qualifying child care for two or more children, depending on your income. Daycare, before- and after-school programmes, summer day camps, and sports camps are examples of qualifying expenses (although not overnight camps). The care must be given to you in order for you to be eligible to work.
While most people claim this credit for children age 12 and younger, it is also possible to claim it for older disabled children or even an elderly parent.
Itemize Deductions When Possible
The majority of people no longer itemise because of the substantial rise in basic deductions brought about by the Tax Cuts and Jobs Act of 2017. However, it’s worth looking at whether itemising your deductions could save you money if you have considerable charity giving or medical costs.
If itemising this year doesn’t make sense, think about how you can adjust your expenditures so that you can itemise in the future. The most typical way to achieve that may be to combine multiple years’ worth of charitable donations into one year.
[ READ: 5 Common Tax Mistakes to Avoid ]
Contribute to a Traditional IRA
Tax savings are primarily achieved through retirement savings. Contributing to pre-tax accounts is one of the best strategies for people to maximise their refund, according to Chavis.
You can still make IRA contributions up until the tax filing deadline, which is April 18 in 2023, even if it is too late to make 401(k) contributions for this spring’s tax return. You are eligible to make an IRA contribution of up to $6,000 if you are under 50 for the 2022 tax year. For people 50 years of age or over, the cap is $7,000.
However, make sure you are funding a regular IRA and not a Roth IRA. Although these IRAs have their own set of tax advantages, contributions to Roth accounts are not tax deductible.
The ability to deduct IRA contributions for single and head of household taxpayers once their modified adjusted gross income hits $68,000 also phases out if you have a workplace retirement plan, such as a 401(k). Only individuals making $109,000 or less are eligible for the full IRA contribution deduction for married couples filing jointly and qualified widow(ers) who have employment plans.
Max Out Contributions to a Health Savings Account
Contributing to a health savings account can help you reduce your tax burden if you have a high deductible health insurance plan that qualifies. These accounts provide quadruple tax savings while enabling users to set money aside for medical expenditures. Contributions to the account are tax deductible, earnings are tax-free as they grow, and withdrawals utilised for qualified expenses are tax-free.
An HSA allows deductible contributions up until the tax filing deadline, just like a standard IRA.
For the 2022 tax year, taxpayers with qualified family health insurance plans may deduct up to $7,300 in HSA contributions, while those with qualified individual health insurance plans may deduct up to $3,650. Those who are 55 years of age or older are qualified for an additional $1,000 in deductible contributions with either form of insurance.
Consult With a New Accountant
If you’ve been consulting with the same tax professional for a while, it might be time to have someone else review your return. A tax accountant may grow accustomed to filing a client’s return in a particular manner over several years and stop actively looking for savings.
A new accountant might do a more thorough analysis of a client’s tax status and, in some circumstances, be able to revise prior returns to obtain higher refunds from earlier years. Those who came to his firm for a second opinion on their returns, according to Priyanka Gupta, “we’ve seen clients pick up a couple thousand dollars.”
Whether you hire an accountant or do your own tax filing, keep in mind that the tax code is constantly evolving, which may affect your ability to save money on an annual basis.
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