How to Get a Bigger Refund

For many people, tax time is a stressful time, but it should be a time of excitement. Over the past few years, the average tax refund has been around $3,000, according to the IRS, a substantial chunk of change for middle-class American families. That kind of windfall can buy a used car, help pay off debt, or go toward a down payment on a house.

Before you can spend your big tax refund, though, you have to make sure you get a decent-sized refund. While what you get back from the government is determined mostly by how much you have paid in, there are several things you can do throughout the year to ensure a bigger refund from the IRS. We at PaydayLoansCashAdvance.com have compiled these tips to help you get the biggest refund possible:

Save everything: Tax returns and tax refunds are based upon verifiable income and expenses. That means you have to hang onto your receipts. Receipts are used by tax filing offices to find deductions for your return, which increases your refund, and receipts are also essential in the case of an audit.

If you donate to charity, spend on business supplies, or pay student loan interest, these things are tax deductible. You also don’t have to have a traditional receipt to take the deduction. Keep online communication like emails, copies of cashed checks, anything that can prove you made tax-deductible payments to an organization. These can serve as your “receipt”.

Start planning for retirement: Retirement savings are tax deductible, whether those savings are put into a 401k at work or a traditional IRA at a bank. The more money that you put into a retirement account, the larger the deduction on your tax return, so saving for the future pays off in the short-term as well.

If you are like a majority of Americans, putting money into a retirement account is something you must do throughout the year in small increments, but, when you are looking for a big tax refund, keep in mind you can make a lump-sum contribution to your retirement account at any time as well.

Retirement plans are an ideal place to instantly increase your tax return, because funds are accepted until the last minute. Up until you file your tax return, you can make a retroactive retirement plan contribution that qualifies for a deduction. So, most years, you have until April 15th to make a contribution to a retirement plan that counts for the tax year for which you are filing.

Educational and medical expenses: The interest on student loans is always tax deductible. As an individual taxpayer or a couple filing jointly, you can claim up to $2,500 in interest paid on student loans. This is especially beneficial in the first few years of repayment, during which, unfortunately, every payment you make on the loan is applied to the interest and not the principal balance. The amount you can claim will taper off in later years when your payments start paying off the principal.

Who can claim a student loan deduction is also a point of note. If you are a parent paying on a student loan taken out in your name for a dependent, you claim the interest, and you can continue to take the deduction as long as you pay interest on the loan. As long as the student was a dependent at the time of the loan, the loan qualifies even after the student becomes independent. If you are an independent student paying on a loan taken out in your name, you claim the interest on the loan.

Medical expenses are also tax deductible if your annual medical expenses exceed 7.5-percent of your gross income. If you have major medical expenses in a given year, do the math to determine if your expenditure exceeded 7.5-percent of your gross income. Any amount over the 7.5-percent should be deducted.

Be charitable: Money or goods donated to qualified charities are eligible for deduction on your tax return, so being charitable can actually put a bigger tax refund in your pocket. Each time you donate cash to an organization or goods to a charity like Goodwill, you should get a receipt so that you have proof of contribution. This helps your return go through smoothly, and will be necessary in case of an audit.

Giving to charity isn’t just about getting better tax refunds, though. By donating to charity, you have more control over the organizations to which your income is distributed. It’s a good way to make sure your money goes toward causes you believe in. It’s also a good way to increase your refund in the latter part of the year, because all donations made through December 31st of each year are eligible for deductions.

Get married: In the tax world, there is a circumstance lovingly referred to as the “marriage penalty.” In this instance, a married couple filing jointly ends up paying more in taxes, and getting a smaller refund, than they would have gotten filing individually. However, in most cases, joint filing is advantageous for couples, resulting in a higher refund.

Joint filing is especially beneficial when one half of a couple brings in considerably more income than the other half of the couple. Also, when you’re married, you have the option of filing jointly or separately, an option you don’t have if you remain single individuals in the eyes of the federal government.

Paying in more money than you need to in taxes isn’t the ideal. It’s the equivalent of giving the government a tax-free loan. Since most tax withholding is done through employers, though, how much you pay in during a tax year is somewhat beyond your control. Getting back a substantial refund is within your control. By keeping track of eligible expenses throughout the year, donating to charity, planning for retirement, and knowing the deductions to which you’re entitled, you can increase your refund, bringing more money into your household.

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