Most people get refunds on their taxes. According to the IRS, the average tax refund paid in 2017 was $2,763.
A tax refund can be used to accomplish important goals, such as paying off debt or starting an emergency fund. So it makes sense to do everything you can to get the biggest refund check possible.
Here are four simple ways you might be able to boost the amount of money you get back from the IRS.
1. Invest in your retirement
Investing in your future can reduce your taxable income, which means you can get a bigger refund. Even better, it’s not too late to make an investment and get a bigger refund this year by contributing to a qualifying retirement account.
“To boost a tax refund, I would recommend contributing to an IRA,” said Josh Zimmelman, owner of Westwood Tax & Consulting. “Contributions to a traditional IRA are tax deductible and can potentially reduce your tax liability or lower your tax bracket.”
You have until April 17, 2018, to make contributions to your IRA that count toward the 2017 tax year. You can contribute up to $5,500 to your IRA for 2017. This limit increases to $6,500 if you’re over 50. However, you might not qualify if your income is too high.
“If you’re a single taxpayer, you become ineligible when your 2017 modified adjusted gross income (MAGI) reaches $133,000. If you’re married filing jointly, you become ineligible when your combined 2017 MAGI reaches $196,000,” Zimmelman said.
If you’ve earned income from a side gig, you might be able to contribute even more. “Self-employed taxpayers have the option of contributing to a simplified employee pension (SEP) plan. You can contribute up to 20% of adjusted net earnings, and those contributions will be tax deductible,” added Zimmelman.
2. Take advantage of tax breaks for education
If you, your spouse, or your dependent attended a qualifying academic or training program last year, you could reduce your taxable income by claiming credits or deductions. You might also be able to claim a tax deduction for student loan interest.
See if any of the following apply to you:
- The tuition and fees deduction allows qualifying taxpayers to deduct up to $4,000 in tuition expenses for taxpayers, spouses, or dependents. To qualify, your MAGI must be below $80,000 for single filers or $160,000 for joint filers.
- The American opportunity tax credit provides up to a $2,500 tax credit for a maximum four years of college education costs. You can claim this credit if you paid tuition for an eligible student. To receive the full benefit of this credit, your income must be $80,000 or less if you’re filing as single. If you’re married and filing jointly, your combined income should be $160,000 or less.
- The lifetime learning credit provides a credit equal to 20% of the first $10,000 of eligible education expenses, including tuition and required fees. You can claim this credit for most training and academic programs that teach job skills, provided your MAGI doesn’t exceed $66,000 if you’re filing as single or $132,000 if you’re married filing jointly.
- The student loan interest deduction allows you to deduct up to $2,500 in student loan interest paid. You must have been obligated to pay the student loan to claim this credit. Your income must also be below $80,000 if filing single or $165,000 if married filing jointly.
3. Make sure you’re claiming all your dependents
Each dependent you claim can reduce your taxable income by $4,050 for 2017, provided your income is below $261,500 for single filers or $313,800 if you’re married filing jointly.
While most people know they can claim their kids as dependents, your children might not be the only dependents who can reduce your taxes. You can also claim relatives and even friends who live with you, provided they meet qualifying criteria, including:
- Dependents must be U.S. citizens, residents, or nationals, or residents of Canada or Mexico.
- No one else can claim the person as a dependent.
- The person you’re claiming as a dependent can’t file a joint tax return, take a personal exemption, or claim a dependent on their own tax return.
- The adult you’re claiming as a dependent must have earned less than $4,050 in income last year.
- To claim an adult as a dependent, they generally must live with you for the entire year, unless they’re part of a special category of relatives, such as parents, in-laws, siblings, nieces or nephews, adult children, or other direct ancestors.
- You must provide at least half a person’s support to claim them as a dependent.
4. Choose the right tax filing status
If you’re married, don’t assume you have to file as married filing jointly. Opting to file as married filing separately could save you money under certain circumstances.
For example, TurboTax suggests you might be better off filing separately if one spouse had a lot of medical expenses because filing separately could reduce that spouse’s adjustable gross income (AGI). That’s important because you can only claim a deduction for medical expenses if those costs exceed 7.5% of your AGI.
You do lose the opportunity to claim some credits if you file taxes as married filing separately, so consider using a tax filing program or consulting a professional to calculate which filing option is best for you.
If you’re single, you shouldn’t assume you have to file as single. If you’re unmarried with a qualifying dependent and you pay for more than half of all household expenses, you could file as head of household, which lowers your tax rate and increases your standard deduction.
Turbocharging your tax refund
Ultimately, everyone’s tax situation is different. It’s important to get tax advice tailored to your situation in order to get the biggest refund possible.
You should also focus on big lifestyle changes you’ve experienced over the course of the year, such as moving or having a baby, to find out if you qualify for new tax breaks.
By working with a tax professional or using a trusted tax software program to prepare your return, you should be able to get the biggest refund possible and get more cash in your pocket.
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