Expert advice: 4 easy steps to increase your tax refund

A tax refund is money the government pays you back if you overpaid your taxes. This can happen for a few reasons, such as:

  • Withholding too much tax from your paycheck
  • Claiming deductions and tax credits that reduce your tax liability

“Inflation is actually helping taxpayers when it comes to their taxes,”. “The standard deduction, which is used by most, saw a significant increase for 2023. Tax brackets also saw a generous 7.1% increase. These two things combined will make it a more forgiving tax season for many.”

Lawrence Sprung, a certified financial planner and founder of Mitlin Financial

Do you want to increase your tax refund by a greater amount than those requirements permitting? Here we’ll go over how professionals recommend doing it.

4-easy-steps-to-increase-your-tax-refund

4 easy ways to boost your tax refund, according to experts

  • Increase contributions to your retirement and health savings accounts.

If you want to maximize your tax refund after the tax year has ended (like right now), one of the greatest strategies is to increase your contributions to certain tax-deductible accounts, particularly traditional IRAs and health savings accounts (HSAs).

“Those contributions will reduce your taxable income and thus your tax bill,”

Lei Han, a certified public accountant and accounting professor at Niagara University.

You have until April 15 (tax day) to contribute to these accounts and deduct your contributions on your 2023 tax returns. While this technique may cost you money up front, Wenyao Hu, a chartered financial analyst and professor at the New York Institute of Technology, believes the benefits are twofold.

“These actions not only support your future financial security but also can significantly reduce your taxable income,”

Wenyao Hu, a chartered financial analyst and professor at the New York Institute of Technology
  • Pick the appropriate deduction and filing approach.

While the standard deduction increased this year, it may not necessarily represent the greatest option for everyone. Some people choose to itemize their deductions.

It is critical to run the figures for both solutions to ensure you are making the correct decision. When doing so, make careful to include often-overlooked deductions such as student loan interest, medical expenses, and child and dependent care.

According to David Johnston, managing partner of Amwell Ridge Wealth Management in Flemington, New Jersey, your tax professional can assist with these comparisons. What if they don’t? “They’re not doing their job correctly,” Johnston claims. “It should never be overlooked.”

How to get relief with IRS tax debt, according to experts.

  • Charity Donation

Hu suggests that you donate to your favourite charity to increase your deductions. If you itemize your tax returns, you can deduct charitable contributions of up to 50% of your adjusted gross income.

If you’re over 70.5 and have a conventional IRA, you can use the IRS’s Qualified Charitable Distributions to lower your taxable income and increase your refund. This allows you to donate up to $105,000 of your IRA funds to a charity of your choice rather than meeting the agency’s Qualified Minimum Distributions.

“The charity receives the full value of the donation, and the taxpayer avoids paying income tax on distribution,” Burnette said. “This reduces Adjusted Gross Income and potentially lowers the amount of Social Security income that is taxable.”

  • Stay organized and precise.

Finally, make sure everything is in order before beginning the tax filing procedure. Have your income paperwork, deduction receipts, and bank account and investment statements on hand.

“Don’t start doing your taxes until you have everything you need to file them, organized and ready to be entered,” he advises. “Missing even one piece of information could result in you paying more taxes than necessary.

You can also seek professional assistance. While they will undoubtedly charge a fee, they will also be able to help you identify refund-boosting chances that you may not have considered. They can also assist you plan your future tax approach.

Suggestion

A better alternative? Put the additional money you considered withholding into something that pays you interest, such as a certificate of deposit or a high-yield savings account.

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