3 Simple Ways to Maximize your Tax Return

We all fill out our taxes hoping to owe as little as possible, or even receive something back. Follow these 3 steps and you’ll be well on your way to getting a check in the mail this year, instead of a bill.

 

1) Do some Charitable Giving

 

Giving is its own reward to be sure, but the tax benefits you can receive by helping others allow you to give even more. The IRS incentivizes giving by allowing individuals to write-off a portion of their charitable contributions each year. Organizations that qualify for these deductions, “include nonprofit groups that are religious, charitable, educational, scientific, or literary in purpose, or that work to prevent cruelty to children or animals.”[1] Check to ensure your organization is qualified, correctly file Form 1040, and your all set.

 

2) Save for Retirement

 

This is another win-win – put aside money for your future, get back more today. If you don’t have an IRA (individual retirement arrangement) yet, drop by most any bank or financial institution and open one. Simply put, it is a way you can save for retirement and receive major tax benefits at the same time. The IRS explains them this way: “You may be able to deduct some or all of your contributions to a traditional IRA. You may also be eligible for a tax credit equal to a percentage of your contribution.”[2] The funds you keep within your IRA are not taxable until they are distributed to you; however, these back-taxes can be avoided by using a Roth IRA instead.[3] To decide which is right for you talk to a tax professional.

 

3) Deduct your Interest Expense

 

Debt is a normal part of life for many of us; it’s the interest that builds on the debt we owe that can keep you awake at night. Fortunately, certain type of interest can be deducted on your tax returns – which allow you to put more of your own money to work to get back in the black. Some of these include investment interest, qualified mortgage interest, interest accrued in some business activities, and more.[4] You can even deduct up to $2500 of interest paid on student loans![5]

 

 

These 3 simple things benefit you both now and in the future, as well as others who need a helping hand. There are many other deductions you may qualify for that will reduce your tax burden even further. Don’t miss out – click here to talk to one of our tax professionals.

[1] IRS. (2018). Publication 526 (2017), Charitable Contributions. Retrieved from https://www.irs.gov/publications/p526

[2] IRS. (2018). Topic Number 451 – Individual Retirement Arrangements (IRAs). Retrieved from https://www.irs.gov/taxtopics/tc451

[3] Ibid.

[4] IRS. (2018). Topic Number 505 – Interest Expense. Retrieved from https://www.irs.gov/taxtopics/tc505

[5] IRS. (2018). Topic Number 456 – Student Loan Interest Deduction. Retrieved from https://www.irs.gov/taxtopics/tc456

Leave a Reply