Money Done Right may be compensated if you make a purchase after clicking on a link.
April 15 is just around the corner, so you’re probably looking for ideas on how to get the largest tax refund possible. We’re here to help you put some money back into your pocket.
Before we get to it, you may want to know that, following the latest changes in tax law, if you’re married and you have kids, you should see a considerable increase in your tax refund compared to 2018.
Also, you no longer have to keep track of your expenses, mileage, and income and struggle with deductions as you used to.
While Hurdlr can help you pay lower taxes, it won’t file your tax return on your behalf, so it is important that you approach this endeavor the right way.
The key to getting a big tax refund is to prove to the IRS that you’ve paid more taxes than you owed.
This means gathering all relevant documents, from your last year tax return to this year’s form, receipts, and more.
It can take time and effort, which is why you should start early. Here are a few tips to guide you:
- Don’t throw any tax-related documents, as they may be important. Collect all receipts, information, correspondence, and calculations you’ve gathered throughout the year.
- Put together a list of necessary documents and check the ones you already have.
- Save the tax-related emails you’ve received and will receive in a separate folder, to avoid deleting them accidentally.
- Organize your documents by categories and store them separately, to make it easier to find the ones you need.
- Write down and gather support documents for any independent income (stocks or properties sold, rentals, etc.)
- Find the forms you need to submit. To save time and make sure you find everything in one place, look them up on the IRS website.
Now that you have all the information, documents, and forms you need to file your tax return, in the following lines, we will teach you how to get the largest tax refund possible.
How to Get the Largest Tax Refund Possible: 11 Secrets Revealed
When you make money, you have to pay taxes, unless you know a few secrets on how to get the largest tax refund possible.
Truth be told, these are not so much secrets but rather tips every experienced CPA should provide to their clients.
The secrecy comes from the fact that very few taxpayers seem to be aware and take advantage of them. Luckily, you have your CPA at Money Done Right to guide you. Here is what you should do:
1. Pay and File Your Taxes on Time
Delays in paying and filing your taxes can be costly. The penalties for late filing range from 4.5%/month to 22.5% of owed taxes.
For payment delays, you risk penalties from 0.5%/month to 25% of owed taxes.
The only thing you can do to avoid late payment penalties is to plan your budget better and pay your taxes on time.
When it comes to avoiding late filing fees, the solution is simple: Form 4868. If you file it by April 15, 2019, you gain a six-month extension.
This means you can file your taxes until October 15, 2019. It should give you more than enough time to gather and organize the necessary documents and implement the strategies below.
2. File Your Taxes Electronically and Request to Receive Your Refund through Direct Deposit
If you haven’t done it before, you’re probably worried and unsure that you can do it. However, filing electronically is easier and more beneficial than using the traditional method, especially when you use an app like Hurdlr.
- Tax returns filed electronically are processed faster by the IRS, which means you will get your tax refund earlier.
- Filing electronically could actually gain you between three and six weeks. The sooner you file your tax return, the sooner you will receive your tax refund.
- To receive the refund even faster, request to have it deposited directly into your bank account or, even better, IRA account.
- Electronic filing is also a great way to prevent mistakes. The online filters do not allow you to submit an incomplete form, thus increasing your chances of avoiding mistakes and providing accurate information.
- Moreover, when filing online, you receive a confirmation that no other filing solution provides. If any forms or documents get lost, they cannot penalize you for late filing.
For all these reasons and more, online is the safest way to file your tax returns and make sure you receive your tax refund.
3. Itemize Your Tax Deductions
The IRS lets you claim standard deductions for many expense categories. At first sight, it may seem a viable alternative to avoid getting into too much detail and needing to send in tons of support documents.
However, if your qualifying expenses exceed the threshold of $12,000 for singles and $24,000 for spouses filing jointly, the effort should be worth it.
This is especially true if you are a self-employed homeowner residing in a high-tax area. You can claim deductions for anything from home office and advertising to healthcare insurance, vehicle use for work purposes, and more.
4. Claim a Home Office Tax Deduction
If you have an office at home that you use for work purposes exclusively, you might be able to deduct any related expenses. In the past, in order to do so, the office had to be the primary location of your business and you were not allowed to maintain other business premises.
The rules have changed, to the point where you can claim deductions for a home office that you only use for management or administrative activities.
For example, doctors who provided consultations at hospitals could not qualify for home office deductions but they do now. So do plumbers, even if they provide house calls and they do not have a fixed location for their business.
As a standard, the IRS lets you calculate your home office deductions at $5 per square foot. However, you may be able to deduct more if you use one of the following calculation methods:
- By surface – Determine the percentage of the overall property occupied by your office and deduct the corresponding percentage off your household expenses.
- By rooms – Divide your overall household expenses by the overall number of rooms in your home to calculate the expenses for a single-room office. If your office occupies more rooms, you will have to multiply the expenses per room by the number of office rooms.
Common examples of home office expenses you can deduct are rent, insurance, housekeeping, and utility bills.
5. Rethink Your Filing Status
In your quest for solutions on how to get the largest tax refund possible, you’ve probably never paid attention to the filing status you choose when filling out your tax return forms. You should, because your status significantly influences the refund you can obtain.
If you’re married, you may want to consider filing your tax return separately from your spouse. Yes, most couples file jointly but that doesn’t mean this is the best strategy.
When determining certain deductions, the IRS uses your adjusted gross income (AGI) in their calculations. If you and your spouse file separately, this will give you lower AGIs.
Also, if one of you has high medical expenses, like Cobra payments following job loss, separate filing could help you qualify for larger deductions.
Of course, there are also drawbacks to separate filing. An accurate method of determining which solution is best in your case is to calculate your tax refunds for both options.
If you’re not married and you have qualifying dependents, you could file your tax return as Head of Household. Most CPAs recommend this solution to clients interested in how to get a big tax refund.
You would get higher standard deductions and more favorable tax brackets than if you were filing your tax return as Single.
Qualifying dependents can be:
- Children you support financially and who have lived with you for at least six months
- Elderly parents to whom you provide more than half of their financial support, even when they don’t live with you
If you decide to file as a Head of Household, remember to fill in your dependents’ taxpayer IDs (social security numbers).
6. Maximize Your Retirement Savings
If you’re looking for advice on how to get the largest tax refund possible for 2018, this method may no longer be of interest to you, considering that it is time-sensitive.
However, you should keep in mind that contributions to your 401(k), employer’s retirement plans, and IRAs are deductible.
Although Roth 401(k) and Roth IRA are not subject to tax breaks, they are an excellent option to bypass taxes on investment income and withdrawals.
If saving for your retirement seems out of reach, consider using Worthy Bonds. You won’t even feel how the money starts piling in your holding account and your investments start returning profits.
7. Unload Your Losses
Sometimes, even the most promising investments fail. If you had the misfortune to see your investments lose value in 2018, now would be a great time to turn your losses into something positive.
You can use them to zero out your capital gains and deduct an amount of up to $3,000 per year against your ordinary income. You can carry excess losses forward to your 2019 tax year or further if necessary until you use up your balance.
8. Deduct Your Healthcare Expenses
Healthcare costs are deductible after they exceed the threshold of 7.5% of your 2018 AGI. To find out if that is your case, add up your expenses with health insurance, Medicare, long-term health insurance, orthodontics, nursing home or caregiving costs, and other expenses.
Keep in mind that you can only benefit from this tax break if you itemize your deductions. Opting for the standard deduction will take it off the table.
You may be tempted to skip this method as it probably won’t get you too much money back into your pocket.
However, any increase in your tax refund matters. It may end up financing your retirement.
9. Bundle Your Donations to Charity
Donations still qualify for deductions. However, you have to itemize and claim them, and that has gotten a little challenging.
In order to surpass the higher standard deduction, you should change your donation strategy. Instead of donating small amounts regularly, save the money and make the donations every couple of years.
Thus, instead of donating $5,000 every year, donate $10,000 every two years. You can claim itemized deductions one year and settle for the standard deduction on the next one.
If you would like to donate to several causes without it impacting your tax refund, you can start a donor-advised fund and recommend grants to your favorite charities from it.
You make your charitable contributions and you receive the immediate tax break for their overall value.
10. Claim Your Credits and Get Your Refunds
Most taxpayers interested in how to get a big tax refund focus on deductions and neglect tax credits. This is a mistake.
Tax credits may actually be more effective than deductions at increasing your tax refund. They represent a dollar-per-dollar solution to reduce your taxes. For every $100 credit, you take off $100 from your taxes.
Common examples of tax credits that are accessible and easy to claim are:
- The Earned Income Tax Credit
- The Dependent and Child Care Credit.
- The American Opportunity Credit
- Lifetime Learning Credit, etc.
- Energy-efficient home improvements credits, etc.
There are many more tax credits you could claim. Discovering them may take time and research, but it will be worth it.
11. Learn How to Get the Largest Tax Refund from a Professional
If you’ve been filing your own taxes, now could be a great time to change your strategy. Sure, doing it yourself saves you the money you would pay to a CPA.
However, chances are you’re missing out on numerous and valuable opportunities to save money.
An experienced and dedicated CPA could help you discover and claim your rights and provide you with the guidance and tools you need to take matters into your own hands in the future.
Learn to Save and Make Money the Right Way with Money Done Right!
At Money Done Right, we have made it our mission to help you save, earn, and grow money. Whether through tips on how to get a big tax refund, app recommendations, challenges, or games, we are here to help you succeed.
Would you like to save money, have fun while doing it, and be rewarded for your savings? Try Long Game! If you sign up through this link and use our Long Game promo code 28ZEPK, you get a 1,000 coin bonus.
We will not rest until we see you accomplish your goals. You can help us by sharing your thoughts on the advice we provide (in this case, the above tips on how to get the largest tax refund possible), and suggesting other topics of interest to you.
Feel free to do so in a comment below!
Earn. Save. Grow.
Sign up for updates on ways to make, save, and invest money.