How To Increase Your Tax Refund
Increasing Your Tax Refund requires a year round effort to maximize Above-The-Line Deductions and fine tune your charitable contributions. Carefully tracking personal residence deductions like property taxes, mortgage interest, points and closing fees along with many other tax deductible expenses will allow you to claim more itemized deductions and increase your income tax refund.
Once every year we all fret the outcome of our fanatical liability to the federal government, do I owe more taxes or, an I getting a refund. Your individual tax return has to be submitted to the Internal Revenue Services (IRS), by the 15th+- of April. Depending on whether there is an extended deadline due to weekends.
A secondary option to this is to file an extension to get an additional 6 months of extra time from April 15th to submit your tax return by October 15th.
However, you don't need to sweat the outcome if your planning ahead as you should be to keep as much of your annual income as possible. Above-the-line deductions can be taken regardless of whether the taxpayer is able to itemize Expenses in this category can be deducted by any taxpayer who pays them, so missing them may amount to poor planning and a bigger tax bill.
Everybody has a desire to pay less taxes. Focusing on management of your tax affairs rather than looking for loopholes and making excuses is a much better approach to successful tax filing.
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Here is how to break down segments of your taxable income to increase your tax refund
Taxable Income and Reductions or Deductions that can be applied
- Gross Income Wages, salaries and investments, Subtract - Above-the-Line Deductions Equals = Your Adjusted Gross Income
- Adjusted Gross Income Subtract - Standard or Itemized Deductions Equals = Your Taxable Income
- Taxable Income Subtract - Taxes Already Paid or Withheld as well as Tax Credits Equals = Balance of Taxes Due or Amount of Tax Refund
What Qualifies as Above-the-Line Deductions?
Above the line deductions are deducted from your Gross Income to determine your (AGI) Adjusted Gross Income which is calculated for tax filing purposes, and to take advantage of dollar-for-dollar reductions of your gross income. Above the line deductions may include such items as education expenses, alimony payments and property sale losses. They are a big advantage to taxpayers since they reduce the overall tax burden on your gross income.
Trade and Business Deductions
Trade deductions are allowed for the business carried on by the taxpayer so long as the trade or business does not consist of the performance of services by the taxpayer as an employee. A portion of activities related to domestic production on certain goods or services can be deducted if it meets the IRS conditions.
Self Employed Health Insurance Premiums
The cost paid for individual health insurance policies (including high-deductible policies) may be fully deductible for self-employed taxpayers. As with HSAs and MSAs, taxpayers must not be able to get group health coverage of any kind.
Retirement Plan Contributions
Fund your retirement account by starting a health savings account and go into business for yourself to take advantage of these incentives in the tax code. Qualified plans such as a 401(k) and traditional IRAs or 457 plans are tax deductible.
Self-Employment Business Expenses
Sole proprietorships can deduct virtually any expense incurred in the operation of their business on a Schedule C. Expenses can include insurance, legal fees, rent, utilities, salaries and contract labor, equipment and supplies. This also includes one-half of the self-employment tax that must be paid on this income.
Student Loan Interest fees are deductible so long as the taxpayer's income does not exceed $75,000 for a head-of-household, qualifying widower, or single tax filers, $150,000 for joint filers. All interest paid on federally-subsidized student loans up to a certain amount is deductible. Tuition Fees and other educational expenses may be better off claimed as a deduction rather than claiming an educational tax credit for them. Those who are unable to qualify for these credits may be able to take this deduction as well.
Transporting household goods from one residence to another for work or business purposes are generally fully deductible, provided they are not reimbursed by an employer. The move must be at least 50 miles further away from the taxpayer's previous residence than their previous workplace was.
Payments made to a spouse prior the establishment of a divorce decree that are not classified as child support may be counted as alimony. Payments of this kind are deductible from your gross income.
Early Withdrawal Penalties
Penalties and fees paid for the early withdrawal of cash from a savings bond or CD that is reported on Form 1099-INT or 1099-DIV can be deducted from your gross income.