5 Hidden Ways to Boost Your Tax Refund

Tax Refund Loans

With the average tax refund recording a decrease year after year, many people are worried about what they’ll get once the year ends. You’re probably one of the people wondering how much tax refund you should expect for the ending year. But you can’t just sit down and wait to receive whatever the government decides to give you.

Before the tax season gets here, you need to start working out ways to get a bigger tax refund. This could involve taking advantage of tax breaks or minimizing your tax liability. Anything legal that will ensure you take home some extra bucks is welcomed. This article discusses five hidden strategies that can help you get a bigger tax refund.

  1. Check Your Filing Status

How you file your taxes will determine the amount you get as a refund, especially for married couples. While many married couples love the idea of filing taxes together, in many cases, you’re better off if you do it separately. That’s if you want to get some extra cash this year.

If you spend a lot on medical expenses, you need to file separately to reduce the adjusted gross income and increase the deduction amount.

But there’s another downside of filing separately. One of them is losing deductions that those who file jointly get. The best thing to do so that you don’t miss out on the benefits of both methods is to mix-and-match the two filing statuses.

If you’re unmarried, you can also increase your tax refund by checking if you qualify for the status of head of household. To be eligible for this, ensure you pay more than half the money needed to maintain a household and have a qualifying dependent in the year. The dependent may be a child, an elderly parent, or any dependent adult.

  1. Adjust Your Withholding

How much money you’re withholding from your paycheck will greatly determine the amount you get as a tax refund. If you’re not withholding anything, you’re likely to get a small refund or even end up owing the IRS.

Start by decreasing the number of allowances you get in your W-4 form. Consider reviewing your allowances every time there’s a major event in your life. For instance, if you’re getting married, switching jobs, or getting a child, you should review your allowance. Check the amount you’re withholding every single time.

If you reduce the allowances, you will increase the taxes withheld from your pay. You increase your chances of getting a large refund at the expense of your paycheck amounts.

  1. Understand the Right Timing to Boost Your Refund

Timing has more to do with the amount you’ll get as your tax refund. You should watch the calendar closely if you’re coveting a large tax refund. Check out for some contributions and payments you can make at certain times of the year to boost your refund.

For instance, you can pay your start of the year Mortgages before the end of the year. This gives you an additional interest in your mortgage interest deductions. Also, consider making charitable contributions to a qualified charity. Another way is to schedule your medical examinations and treatments in the last quarter of the year. This will boost the deductions you get in medical expenses.

For self-employed individuals, check purchases that can qualify for deductions. Things such as software or office equipment fall in this category. Check if you can claim the home office deductions. With this, you can even paint your house and deduct the cost.

  1. Start a Traditional Retirement Account Contribution

A 401(k) contribution or an individual retirement account provides a perfect platform for those who want to boost their tax refund. With these contributions, you won’t owe any taxes as they’re deferred until the time you’ll need them for your retirement.

If you made your contribution to IRA before the 2020 deadline, you’re probably among the people benefiting from tax deductions.

Apart from the IRA deductions, you may also qualify for a saver’s credit. IRS will allow you to double-dip. You get additional credit for contributing to your retirement.

  1. Claim the Refundable Tax Credits

Your tax credit is every dollar deduction of the taxes you owe.  IRS subtracts it from the total amount of taxes you owe for the year. Having a refundable tax credit enables you to get a refund, which is more than your tax liability.

If you’re in a family that consists of three or more children, you have chances of earning up to $6,660 worth of income tax credit. You might also get qualified to the Child and Dependent Care Credit or Child Tax Credit. If you’re a parent with college-age children or your schooling, you qualify for Lifetime Learning Credit.

Many taxpayers qualify for this credit but do not claim it because they have no idea they need to. But some taxpayers do not qualify because they may be newly qualified or there’re changes in their income. Others have their income below the IRS income filing threshold. It will help if you realize all the credits you qualify for to claim them.

Bonus Point: Hire a Professional to Help You Out

Sometimes understanding tax refunds can be difficult, especially if you have little financial knowledge. A professional tax preparer can help you understand everything concerning tax refunds and how to boost them. They’ll help you identify credits and deductions, help you limit your obligations, and ensure you scoop the biggest refund.

Bottom Line

A tax refund means you’ve been overpaying the government throughout the year, and you have to get the excess money back. Don’t be contented with the small tax refund when there are several ways to boost it.  Just make sure regardless what method you use to increase that tax refund is legal, so you avoid getting into trouble.

It’s also not a bad idea to forgo the big refund for a bigger paycheck instead. You can use the extra money to invest, pay off debts, or set aside your emergency funds. Go for whatever works well for you.