Another tax season has arrived. Are you happy about how it turned out for you? It isn't too late to start planning for next year, so you can spend it on fun things (like new furniture) or personal improvement (like your education). Here are some ideas to help you make sure you get the biggest possible income tax refund (or the smallest possible tax bill):
- Withhold as much as you can. This one's a no-brainer! When you fill out your W-4 at a new job you tell the government how many exemptions you'll be claiming. More exemptions equal less tax withheld. Talk to your human resources department about changing your W-4 if you want more tax held from each paycheck.
- Deduct all charitable contributions. Any donation made to a 501(c)(3) nonprofit can be used for tax deductions, thus lowering your bill. Make sure you have receipts documenting all such donations. These contributions don't have to be cash; they may also include the use of your vehicle, donated property, and even gifts to churches and other faith-based organizations.
- Deduct the cost of caring for others. Whether it's taking care of your kids or your aging parents, many of those dependent care expenses can be deducted. Alimony is deductible, too. But child support isn't. Check with your tax preparer about what you can claim.
- Deduct all work-related expenses. Do you use your own laptop or cell phone for your job? Did you pay to subscribe to an industry publication? Do you pay dues to a union or other professional organization? All of these expenses can be deducted. Just make sure you consult with your accountant to help you sort out what is and is not allowable.
- Decide which filing status is right for you. Are you filing as a single person, as a head of household, as a married person filing separately or as a married couple filing jointly? If you're married, a joint filing will generally lower your tax bill, but you may want to file separately if one of you has unpaid medical bills or is behind on student loan or child support payments.
- Maximize your IRA contributions. Here's a great way to boost your tax refund. An Individual Retirement Account helps you save for your golden years. And contributing to it lowers the amount of taxable income. Just make sure you meet contribution deadlines and that you're aware of the maximum amount that can be used to lower taxable income.
- Refinance your mortgage. If you can refinance at a lower interest rate, your mortgage payments will go down. Not only that, but the bulk of your payments will go toward the interest on the loan. And since payments on interest are deductible, you should have a larger tax deduction. This is a simplified explanation of how it works, of course; consult with your tax preparer to see if refinancing will help you with your taxes.
- Start a business. A home-based business can bring you thousands of dollars in tax savings. Everything you use in your home office can be deducted. Meditec has more than 75 programs in careers spanning from healthcare to information technology, and many of these can be done from the comfort and convenience of your own home. You might even go into tax bookkeeping or accounting clerk training!
- Get professional help. Tax law is always changing, so you need to hire an accountant who knows the latest rules and how they affect you. New home-buyer credits could work in your favor. Energy-efficient home remodeling may earn you some tax credit. Tax planning takes work, but when you get that huge refund you'll know that it was all worthwhile.