Taxes can be a pain, but getting a refund check in the mail can make it worth the trouble. Whether you want to save your tax refund or spend it in on something you or your family needs, everyone wants as much money back as they can get. There are many ways you can increase your refund for tax season 2021, and we’re here to help. File as early as possible If you file early, you have additional time to get your tax filing information in order, which will help you be more organized and have a better possibility of getting a bigger refund. Waiting until the last minute can leave you scrambling to get things together, and you may miss out on refund possibilities. File early, and be organized and efficient. Your tax refund will thank you. Make sure you are choosing the correct filing status Filing status greatly affects your tax refund, so you want to make sure you are filing the correct one for your situation. There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow(er) with Dependent Child. Research which status fits and will give you the best possible refund. If you are unsure what the best option is, consider consulting a tax professional. Keep track of medical costs Although documenting all medical expenses and doctor’s visits can be monotonous and tedious, it can help you get a better refund. Many expenses have the potential to be tax deductible. According to TurboTax, the IRS authorizes you to deduct medical costs that are more than 7.5 percent of your adjusted gross income. However, any expenses that are reimbursed to you, most likely from your insurance or employer, are not tax deductible. Nonetheless, keeping track of all medical costs will prove beneficial to you not just for this tax season, but for all tax seasons to come. Go through your medical bills and receipts carefully, and find everything that has the potential to be deducted. Contribute to charity Contributing to charity is a win-win. It helps someone in need, and helps you get a better refund for tax season 2021. Similar to medical expenses, make sure to keep a detailed record of your donations, and ensure that it is a qualified charity in order to receive such a deduction. You can look into additional tax-saving tips for charitable contributions to ensure you are receiving all of the possible deductions. Save money for retirement If you contribute to a 401K either individually or through an employer, Credit.com explains that “your contributions are made with pre-tax dollars, which helps lower your taxable income for each tax year you contribute to the plans.” Investing in your future is not just a long-term benefit; it can benefit you as early as tax season 2021. Claim anyone you have been supporting Did you know you can claim someone as a dependent you have been supporting, even if the dependent is not your child? U.S. News explains that dependent exemptions of $4,000, deducted from your income, are possible if you have been supporting someone for the entire year, he/she is unable to provide more than half of the year’s income, and any income earned is less than $4,000. So, make sure to take advantage of this tax break if it applies to you!
Tax filing can become something you do without too much thought, especially when not much has changed since the year before. But what if something in your life has changed? What do you do? What changes are important to note in your taxes? Well, there are quite a few life changes to be aware of that will affect your taxes. If you fail to report the changes in your life, you may have difficulties when filing, and nobody wants to deal with the fallout of tax mistakes. Here are some common life changes that will affect your taxes. Marriage Getting married is a life change that most often saves you when tax season comes rolling around. Although there are cases when tying the knot can increase your taxes, usually that is not the case. As a married couple filing jointly, you can claim more deductions, increasing your tax refund immensely. Bun in the oven If you recently had a baby, best wishes are definitely in order, but so are tax updates. Fortunately, expanding your family is another life change that will prove beneficial to your tax refund. Be aware of whether or not you can file as head of household, even if you are single. Doing so can dramatically increase your refund, as can claiming your child as a dependent. Don’t forget to include your newborn on your tax forms! Home purchase Buying a home is an expensive purchase that continues to be expensive month-to-month and will definitely affect your taxes. Thankfully, certain details in buying a house can be deducted in your taxes. TurboTax explains that the interest you pay on every monthly payment is tax deductible. In addition to that, real estate taxes that you pay when buying a house are also tax deductible. Even though buying a house is expensive, tax deductions will make sure that you get some of that money back. Retirement If you recently retired, congratulations! You made it! But remember this is one of many life changes you have to note in your taxes. If you are only receiving social security as your income, you don’t have to go through the trouble of filing. However, if you have any other sources of income, which you most likely do, you still have to file your taxes. According to USA Today, “How much you pay in federal income tax is based on your taxable income, which is your income minus any exemptions or deductions for which you qualify. The higher your taxable income, the higher the percentage of your income you may pay in taxes, depending on your income tax bracket.” Divorce Depending on when your divorce becomes final, there are a couple options when filing your taxes. If your divorce will still not be final by December 31st of that tax year, you can either file jointly, or you can file separately as a married couple. However, if you are divorced before December 31st, you can file as single. And if you had a dependent for more than half of that tax year and you paid for more than half of your home costs, you can file as head of household. Lastly, if you pay your spouse alimony, the payments are tax deductible. Whatever your situation, make sure to work out the logistics before filing because divorce is a life change that will certainly affect your taxes. Business startup Starting a business is an exciting life event, but it also makes tax filing a bit more complicated. U.S. News explains that you can deduct as much as $5,000 of your business startup costs if your overall costs were $50,000 or less. As your business expands and is around for longer, deductions can increase and change completely. Because owning a business can make tax filing so complex, we suggest taking your taxes to someone to help, especially in the first year of the business. Death of a loved one Although not a pleasant life change, the death of a loved one is still a change that needs to be documented on your taxes. The year that your spouse dies, you can still file jointly for that year only. Every year following, you must file as single. An estate planning attorney, Beth Shapiro Kaufman, also points out that “If there’s an option to accelerate income into that year, that could be more advantageous than having the income taxed in the following year when the spouse will be taxed as a single individual.”While these are not the only possible life changes that can affect your taxes, these are some of the most common ones. The most important thing to do when filing is be aware of any of these changes and make sure to document them correctly. Your taxes will thank you even if no one else does!
Tax season can be a daunting task you dread every year. The preparation, the apprehension, the actual filing itself, the waiting—it’s the ultimate taxing experience (pun intended). So, how do you deal with such emotions? You read this article and look at a tax meme to express what your words can’t.When tax season is approaching: When you receive your W-2 and wonder where all that money went: When the deadline is approaching and panic starts to set in: When you’re halfway through filing and almost give up: When you go a little overboard on your deductions and suddenly fear you’re going to get audited: When you don’t care anymore because you finally finished: When you’re waiting for your refund to come: When you finally receive it: When you suddenly feel rich and think of everything you could spend your money on: And then when you decide you should be smart and save it: All Via Giphy