File Your Taxes Electronically and Request to Receive Your Refund through Direct Deposit
Filing electronically is easier and more beneficial than using the traditional method, Tax returns filed electronically are processed faster by the IRS, which means you will get your tax refund earlier.
Filing electronically could actually gain you between three and six weeks. The sooner you file your tax return, the sooner you will receive your tax refund.
Electronic filing helps reduce mistakes. The online filters do not allow you to submit an incomplete form, thus increasing your chances of avoiding mistakes and providing accurate information. Online is the safest way to file your tax returns and make sure you receive your tax refund.
Rethink Your Filing Status
Your filing status can significantly affect the refund you can obtain. If you’re married, you may want to consider filing your tax return separately from your spouse. Most couples file jointly but that is not always the best option.
When determining certain deductions, the IRS uses your adjusted gross income in their calculations. If you and your spouse file separately, this will give you lower rate. Also, if one of you has high medical expenses, like Cobra payments following job loss, separate filing could help you qualify for larger deductions.
If you’re not married and you have qualifying dependents, you could file your tax return as Head of Household. Most CPAs recommend this solution to clients interested in how to get a big tax refund.
Claim Your Credits and Get Your Refunds
Tax credits may actually be more valuable than deductions at increasing your tax refund. They represent a dollar-per-dollar solution to reduce your taxes. For every $100 credit, take off a $100 from your taxes.
Common examples of tax credits that are accessible and easy to claim are:
- The Earned Income Tax Credit.
- The Dependent and Child Care Credit.
- The American Opportunity Credit
- Lifetime Learning Credit, etc.
- Energy-efficient Home Improvements Credits, etc.
There are many more tax credits you could claim, take some time and research if any apply to your situation.
Itemize Your Tax Deductions
The IRS lets you claim standard deductions for many expense categories. If your qualifying expenses exceed the threshold of $12,000 for singles and $24,000 for spouses filing jointly, be sure to provide all support documentation. The return will be worth the effort.
If you are a self-employed homeowner, you can claim deductions for anything from home office and advertising to healthcare insurance, vehicle use for work purposes, and more.
Claim Home Office Tax Deduction
If you have an office at home that you use for work purposes exclusively, you might be able to deduct any related expenses. In the past, the office had to be the primary location of your business and you were not allowed to maintain other business premises.
That has now all changed. Now you can claim deductions for a home office that you only use for management or administrative activities. As an example, doctors who provided consultations at hospitals could not qualify for home office deductions but they can now. This applies professional of all kinds, such as therapist and business consultants.
The IRS lets you calculate your home office deductions at $5 per square foot. Common examples of home office expenses you can deduct are rent, insurance, housekeeping, and utility bills.
There are two ways to calculate this, first by square footage. Determine the percentage of the overall property occupied by your office and deduct the corresponding percentage off your household expenses. The second way in by the number of rooms. Divide your overall household expenses by the overall number of rooms in your home. If your office occupies more rooms, you will have to multiply the expenses per room by the number of office rooms.
Maximize Your Retirement Savings
Make contributions to your 401(k), employer’s retirement plans, and IRAs are deductible. Although Roth 401(k) and Roth IRA are not subject to tax breaks, they are an excellent option to bypass taxes on investment income and withdrawals.
Set Up a Health Savings Account
If you have a qualifying high deductible health insurance plan, you can save on your taxes by contributing to a health savings account.
These accounts allow people to put aside money for medical expenses, and they come with triple tax savings. Contributions are deductible, money in the account grows tax-free and withdrawals are tax-exempt when used for qualifying expenses.
If you have a qualified family health insurance plan, you can deduct HSA contributions of up to $7,300. If you have an individual plans, you can deduct up to $3,650. With either type of insurance, those who are age 55 or older are entitled to make an additional $1,000 in deductible contributions.
Claim Dependent Care Expenses
If you claim children on your tax return, you receive a $2,000 child tax credit for each one younger than age 17. But don’t miss out on the chance to receive an additional tax credit for your day care costs.
Depending on your income, you may be able to receive a credit worth up to 35% of $3,000 spent on qualifying care for one child, or $6,000 spent on qualifying care for two or more children. Qualifying expenses can include day care, before- and after-school programs, summer day camps and sports camps (although not overnight camps). To qualify, the care needs to be provided so you can work.
Qualifying dependents can be: children you support financially and who have lived with you for at least six months. It can also apply to elderly parents to whom you provide more than half of their financial support. This claim is available even if they don’t live with you.
Contribute to a Traditional IRA
Retirement funds are a prime way to save money on taxes. One of the best ways you can maximize your refund is to contribute to pre-tax accounts.
You can still fund an IRA up to the tax filing deadline, which is April 18 in 2023. If you are younger than 50, you can contribute up to $6,000 to an IRA for the 2022 tax year. The limit is $7,000 for those age 50 and older.
Be sure you are contributing to a traditional IRA, though, and not a Roth IRA. Contributions to Roth accounts are not tax deductible, although these IRAs have their own set of tax benefits.
Claim a Credit for Energy-Efficient Home Improvements
Thanks to the Inflation Reduction Act of 2022, you may be entitled to a tax break for improvements that increased your home’s energy efficiency.
Credits that had expired in 2021 have been extended for 2022. If you made energy-efficient upgrades such as new windows, exterior doors or added insulation, you can claim a credit of up to $500 on this spring’s tax return.
The new law also expanded those credits into 2023 and beyond and increased their value. If you plan to claim a credit for energy-efficient home improvements, keep all documentation from each purchase in case the IRS needs to verify its eligibility.
Itemize Deductions When Possible
The Tax Cuts and Jobs Act of 2017 significantly increased standard deductions to the point where most people no longer itemize. However, if you have significant charitable contributions or medical expenses, it’s worth investigating whether you could save money by itemizing your deductions.
Don’t be Afraid To Pay for Professional Services
If you’ve been filing your own taxes, now could be a great time to change your strategy. The money you pay a CPA could save you far more than their fee. A CPA or tax professional can help you discover and claim your rights and provide you with the guidance and tools you need to take matters into your own hands in the future.
You are legally entitled to all of the deductions and credits listed above. Be sure to take advantage of any of these that fit your personal situation. Many people are unaware that they are available to them and leave money on the table and end up paying more in taxes than the need to. Get smart and research all of the deductions and credits you are entitled to. Discuss them with your tax preparer and plan ahead! Getting a handle on your taxes can take the bit out of paying them every year.