FollowThese Deductions and Tips Can Help You Get a Bigger Income Tax Refund
- Charitable Contributions
- Look At Non-refundable Credits
- Compile Your Mileage
- Maximize Pre-tax Contributions
- Pay January’s Mortgage Bill in December
Most people do not want to pay more in taxes than they are absolutely required to, and these five tips for getting the highest tax refund can help. A person should be thinking about this all year long, not on the day before the filing deadline. Following these tips and keeping up with changes to the tax code could help a person save money on their federal income taxes.
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1. Charitable Contributions
Charitable contributions may count as a tax deduction if the organization has tax-exempt status with the Internal Revenue Service. The Internal Revenue Service has an online list that can be searched by a charity name or location. Keep receipts for checks or cash donated to a registered nonprofit. For donations of household goods, take a digital photo and create a general list with their secondhand value. Several nonprofits offer pricing guidelines on how much the secondhand items are worth.
2. Look At Non-refundable Credits
There are some non-refundable tax credits that could reduce the amount a person might have to pay on their taxes. For example, the child tax credit is regarded by the Internal Revenue Service as payment toward what an individual with a dependent child owes on their tax bill. The Earned Income Tax Credit and the Health Coverage Tax Credit can reduce a person’s tax bill to zero, but they will not yield a cash refund.
3. Compile Your Mileage
A person who accumulates mileage driving to and from medical services can deduct their mileage as a part of their total medical deduction. According to TurboTax, miles driven in order to get to medical appointments can be deducted at a rate of $0.20 per mile. This can be done under the adjusted gross income threshold for deductions. Miles driven on behalf of a charity can be deducted at a rate of $0.14 per mile as of 2019.
4. Maximize Pre-tax Contributions
It is also possible to reduce the federal tax burden by taking advantage of pre-tax contributions. Some eligible pre-tax contributions include Health Reimbursement Accounts (HRAs), Flexible Spending Accounts (FSAs) and Individual Retirement Accounts (IRAs). The FSA and HRA can be used for a person’s out-of-pocket healthcare expenses, such as prescription co-pays or co-insurance on a doctor’s office visit or procedure. They can also be used for non-covered costs, including eyeglasses or dentures. For the IRA, no tax is paid on the money when it is added, but income tax is owed on the interest earned by the account when the money is withdrawn.
5. Pay January’s Mortgage Bill in December
It may be worth pre-paying January’s mortgage or property tax bill in December. This is due to the mortgage tax credit. A person may wish to do the math in order to see if this would be advantageous, especially if they have a lot of other deductions for the current tax year.
Remember to always keep documentation of expenses, including medical, moving, mortgage, adoption and other costs that are incurred in a year. Charitable contributions of cash and household goods should also be carefully tallied, with receipts from the organization as proof in case of an audit. Following these five tips for getting the highest tax refund could help a person add to their emergency savings fund, pay off a debt or take a much-deserved vacation.
