The fiscal year is coming to an end and everyone is starting to think about filing their taxes. There are few simple tips which can help you make the most of it.
First of all, lets take a look at the changes in your life. If you got married during the year, you can adjust your withholding number for tax purposes. Usually, a marriage reduces the tax burden for married couples who file jointly, but be careful, there may be some exceptions to this rule. Sometimes filing taxes separately gives each spouse a lower adjusted gross income (AGI) which is used by IRS to determine eligibility for using deductions, for instance, medical expenses. This means that some situations, filing taxes separately will provide each of you a larger tax refund. Compute and compare your taxes in both ways, as a couple and as separate taxpayers, or consult a professional for advice.
Also, keep in mind that having a baby will affect an amount of your tax refund. If you are married, you can’t apply for a higher deduction of having a child. But if you are single and you have one or more children it means you can file taxes as head of household which will provide you with a bigger standard deduction. Your children should live with you for more than six months during the fiscal year, and your paid expenses for providing a home such as rent, utilities, mortgage, repairs and food should account for more than 50% of overall expenses.
The same applies to single taxpayers who cared for their elderly parent during the fiscal year. If you paid more than a half of the cost for keeping a home for your parent you can claim these expenses as a head of household on your tax return.
Another way to increase your tax refund involves the use of charitable deductions. If you spent money buying a food for charity bake, donated used or new clothes, appliances or money and you have documented record of these expenses, you can use it as charitable deductions while filing taxes.
It is also important to understand that a tax refund is not a gift from the government. If you have a big tax refund at the end of the year, this means that throughout the previous tax year you had too much money withheld from your salary. In other words, you allowed the government hold your money for up to 16 months, and you didn't get any interest on that money. So If you’re getting a big income tax return, you should probably adjust your income tax withholding. Visit your HR representative and get a new form W-4 or talk with your employer. You always can keep your earned money on a special savings account in the bank or spend it for your own purpose.