Sometimes it seems like the IRS take a bigger portion of your paycheck than you do. If you are feeling stressed about taxes, you aren’t alone, but you do not have to take the situation lying down.
There are steps you can take to boost the size of your refund and reduce your tax burden. With planning and preparation, one can use these five ways to increase the size of your tax refund next year.
If you want a bigger refund, paying a bit more now is one sure way to get it. Increasing the amount of withholding from every paycheck can boost your refund and force you to live on less.
For many people, this kind of forced savings could be a sound strategy. If you are saving for a major purchase, for instance, increasing your withholding now could boost the size of your refund and give you a nice lump sum of money in the future.
There are many reasons to open a new IRA or add to an existing one, but tax savings is one of the biggest benefits. If you are eligible for a traditional IRA, the up-front tax savings could boost the value of the money you contribute both now and in the future.
Opening a new IRA or funding an existing one can lower your tax bill while helping you save for the future. If you do not already have an IRA, now is the perfect time to start one. Another bonus with an IRA is that your deadline to make a contribution is April 15 of the following year–so you still have time to contribute!
It is important to save for retirement, and the sooner you get started the better off you could be. If your employer offers one, putting money in a 401(k) plan is one of the best ways to prepare for retirement.
Just as importantly, putting money in a 401(k) plan can reduce your tax bill now, further enhancing the value of the program. Since you can invest in your 401(k) plan with pre-tax money, every dollar you put in is one less dollar you pay taxes on.
If you think health savings accounts are just about deductibles, you might want to think again. These unique accounts seem custom made for tax savings, and they can reduce your tax bill in three different ways.
Contributing to a health savings account may qualify you for an immediate tax deduction, increasing the size of your refund. But the tax advantages do not end there. The money you put in is allowed to grow year after year, and the funds can be withdrawn tax-free to pay for qualified health-related expenses. If you do not already have a health savings account, opening one is a great way to boost the size of your refund for the coming tax season.
Giving money and tangible goods to charity feels good, but that generosity could also increase the size of your tax refund. Taking charitable deductions can reduce your taxable income, boosting your refund in the process.
It is important to keep good records, especially if you are donating clothing, furniture, and other items. Be sure to get a written estimate of the value from the charity in case you are questioned. If you are donating money, make sure you keep your canceled checks or credit card statements as proof of the contribution.
The five strategies outlined above can help reduce your tax liability and boost the size of your refund, which can make tax time less taxing. And now that you have a larger refund coming your way, the next step is to put that money to good use through investment, professional development, or things that will provide you value in the long run!