Everyone loves getting a refund at tax time and the bigger the check, the better. Although the average refund is around $3,000, not everyone is so lucky. If you owed the IRS or got very little money back this year, we have a few tricks to help boost your refund next year.
Claim fewer allowances on your W-4
Lets be honest, most of us complete a W-4 when we first start our jobs and never think about it again. Owing the IRS is an obvious sign that it’s time to update your withholding information. To make the necessary changes, swing by your employer’s HR department to pick up a new W-4. By claiming less allowances on your form, you’ll have more taxes deducted from your pay. Keep in mind that your paycheck will be a little lighter during the year but you’ll have a better shot at a refund next spring. Submit your new form as early as possible so your changes have time to make an impact.
Hold on to your receipts
The next time you get a receipt, think twice about throwing it away. Some expenses are tax deductible and can help you get a bigger refund. For example, you can deduct the following items if you itemize:
- Medical and dental expenses
- State and local taxes
- Real estate taxes
- Mortgage interest
- Charitable contributions
Just keep in mind that there is a limit as to how much you can subtract for certain expenses. Don’t worry, when you prepare your return with ezTaxReturn.com, we make it easy to claim all the appropriate tax breaks.
Go back to school
On the fence about going back to school? Stop procrastinating and take the plunge. Students who pay for tuition and other related expenses can qualify for the Lifetime Learning Credit which is worth up to $2,000. The IRS doesn’t even require you to pursue a degree. You can take a few courses to improve your job skills and still qualify for the credit.
Save for retirement
Like it or not, you can’t work forever so take advantage of your employers retirement plan while you can. Any contributions you make to a 401K or similar program lowers your taxable income on your tax return. Plus, you’ll walk away with free money if they offer to match a percentage of your contributions. For 2020, the 401k contribution limit is $19,500 but those aged 50 and older can contribute an additional $6,500.
Pay for childcare
Paying someone to watch your kids while you go to work is expensive. In some areas, it can cost as much as a semester of college. The good news is your childcare expenses may help you qualify for the Child and Dependent Care Credit. As part of the deal, parents can receive between 20 to 35 percent of their allowable expenses as a tax credit. The exact figure depends on your adjusted gross income. Before your mind starts running wild, there is a dollar limit on how much you can claim. Taxpayers with one child can claim up to $3,000 of expenses while those with two or more can claim up to $6,000.