Every year, millions of people overpay on their taxes and many who fail to file don’t end up collecting their refunds.
Despite the fact that there’s so much overpayment going on, federal and state governments are deeply reluctant to give you any money back. If you want to know how to get a bigger tax refund, you need to know the rules of the game and how to work within them.
Here are five tips for increasing your next tax refund.
1. Save Your Receipts
If you’re struggling with figuring out how to get some of your paid taxes back at the end of the year, you need to save more of your receipts. By tracking your spending carefully, you’ll naturally think twice before you pull out your wallet. On top of that, you’ll have a stronger handle on how much you’re spending throughout the year.
Save your receipts when you go on business trips, go out to eat with colleagues to talk about work, or when you’re getting a drink with a new client. Believe it or not, these are all instances where you could write things off.
If you’re a writer and you attend a conference, you could write off lots of things that you buy during that trip. For film critics, you could be writing off movie tickets because they’re part of the research that you do.
While most people think of big expenditures like furniture or tech items for an office, there are lots of little things that could get written off too. If you save your receipts you’ll be able to prove that you spent money related to your job.
2. Invest
If you’re not investing your money, you’re losing out on an opportunity to lower your tax burden Without money in places where it could grow, inflation is actually causing you to lose money.
If you put $1,000 cash in a box, with inflation at a steady 3 percent, when you take that money out in 10 years or so, it might only have the buying power of about $900 today. Money doesn’t become more valuable without some help.
On top of that, the work that you do could be taxed at around 40 percent annually. However, if you invest your money, those investments will end up being taxed at a much lower rate, nearly half of what your income is taxed at. While there is a lot of controversy around the persistence of the capital gains tax, you can take advantage of that right now.
Property is another smart place to invest your money. If you buy a low-cost property and spend money to fix it up, you’re not only building an asset, but you could be writing off your spending on that property. If you then turn around and rent that property, there are lots of costs you could write off every year.
3. Donate Some Money
If you fear that your tax bill will be more than you can handle and you can’t bear handing it all over to the government, you could donate some of your money now. Many donations to non-profit groups are tax-deductible and can help you lower your tax burden. With many non-profits, the overheads and bureaucracies are smaller which means that your money will go much further than it would in the hands of feds.
Donating money also helps your community in the long run. If you donate to your local parks or conservation group, they might run some beautification programs that help raise property values. Not only will you make a tax-deductible donation but you’ll have helped increase the value of your home.
Giving money to local groups who need it can have a direct impact. If you have concerns about the environment, pedestrian safety, or other local issues, there is likely to be a group already working on it. Giving them a small cash infusion can give you exactly what you need rather than waiting for it to trickle down from your tax dollars.
4. Think Carefully About Deductions
There are thousands upon thousands of pages in our national tax code. Page after page will detail different types of deductions that companies, groups, and individuals can make. While it’s daunting to think about thumbing through the tax code, you could end up saving yourself money if you take the time to do it.
The number of things you could deduct if you have enough money and investments is almost obscene. Think about all of the assets you have, everything you’ve invested money in, and anywhere you’ve donated money over the course of the year.
The more investments that you have, the more pension funds, retirement accounts, or insurance policies that you purchase, the more opportunities you have. If you earn more than six figures a year, you might want to talk to an accountant who can guide you through deductions.
5. Start a Family
If you’ve been putting off commitment for a few years but want to cut back on your tax payments, now might be the time to make a commitment. Not only do you potentially lower your tax rate by getting married, but each dependent that you can claim will lower your payment.
While it’s not the best reason to start a family, it can help guide your decision if you’re very fiscally concerned. Starting a family is a big decision and one that requires a balance of pragmatism and sincere love. If you can strike the balance, starting a family can also lead to a better tax rate.
Experts Can Teach You How To Get A Bigger Tax Refund
If you really need to figure out how to get a bigger tax refund, then you need the help of an expert. While you can read through the tax law on your own and spend hours on a tax filing website, you need an experienced sherpa to guide you along.
If you want to ensure that you get the kind of tax return that you deserve, contact us for more tips.
