If you felt like you paid too much in taxes or just a refund that was too small last year, this year take a closer look at your taxes. Here are five ways that many people overlook that could easily increase the tax refund that your receive this year in a legal manner that is written into the tax code.
#1 Filing Statuses
If you are married, you need to look carefully at what filing status that you and your spouse used when you both filed your last set of taxes. A joint return may not always be the most effective way to go depending on the situation on you are in; sometimes filing separately may be the way to go. When you file separately, the IRS calculates you and your spouse's AGI, or adjusted gross income, differently. IF you have a lot of medical expenses, travel expenses or miscellaneous deductions, you can pay less in taxes if you file separately instead of together. Filing separately may require a little more paperwork and effort on your part, but could save you money. Talk with your accountant to see if this is an option for you.
#2 Moving Costs
If you are moving, you need to carefully keep track of everything that you spend, from moving boxes to rental truck fees to the gas that you spend on your move. If you move a certain distance away from work, those expenses could be deducted and taken away from your taxes. This is a great way to lower your taxes.
#3 IRA Contributions
The IRS really wants you to save money. They want you to save money so much that they allow you to open a traditional IRA all the way up to the filing date for the previous year's taxes and allow those taxes to be contributed towards your past years taxes. The maximum amount you can put into your IRA changes from year to year, so check with your accountant to find out what the max is and pay that much into your IRA. This will help lower your overall income and perhaps will help put you into a lower tax bracket.
#4 Mortgage Payment Timing
At the end of the year, make your payment for your mortgage that is due in January before the year ends. When you do this, any interest that you paid off on your mortgage can be taken off your taxes for this year. You can also just work on increasing and paying a great portion of your mortgage every month to increase your mortgage interest deduction come tax time.
#5 Property Tax Timing
You may also want to consider paying your property taxes for the upcoming year ahead of time. Paying your current and next year's taxes before the year ends could give you a large enough tax payment to allow you to qualify for an itemized deduction, which may allow you to save more .
Talk to a CPA like Kenneth L Lahner CPA, and go over your taxes from last year and see if any of the situation above could apply to your tax situation for the upcoming year.