It’s oh-so-nice to get a tax refund in the Spring – wouldn’t it be great if you could get one in the summer as well? Sorry, tax refunds come but once a year, but the next best thing is to get a bigger tax refund next year so it lasts into summer. Here are five tips on how to do just that.
1. Increase your withholding. If your refund was miniscule this year or you owed taxes, file a new W-4 tax form with your employer. Reducing the number of exemptions you claim will result in larger amount withheld from your check each pay day, beefing up your tax refund next spring. TurboTax W-4 calculator will help you estimate the right amount of exemptions to claim.
2. Clean out your closets. Clearing out clutter and donating it to charity helps others and can result in tax savings if you itemize your deductions. Your donations must be in usable condition and you must establish the fair value. Use TurboTax ItsDeductible to easily determine the value and track your donations. You’ll also need a signed receipt from the charitable organization that proves you made the donation.
3. Sign up for health insurance. Starting in 2014, if you get your health insurance coverage through the Health Insurance Marketplace, you may be eligible for the premium tax credit if you have moderate income. To be eligible you must buy health insurance through the Marketplace and not be eligible for coverage under an employer plan.
4. Take a credit for child care. If you work and pay for child care, until your child turns 13, you may be able to claim up to 35% of the first $3000 of expenses ($6000 for two or more children). Nursery school, private kindergarten, after school programs and day care are all qualifying expenses. Summer day camps also qualify, though overnight camps do not, nor do tutoring or summer school. If you pay a relative who isn’t your dependent to take care of the kids, that qualifies as long as your relative reports the income on their tax return.
5. Keep track of deductions. Wouldn’t it be nice if you could open a file and everything you need to prepare your tax return is there? You can make that happen by creating a file you label Current Tax Info. Every time you see something during the year that’s tax-deductible, drop it into the file. Don’t forget union dues, legal and professional fees relating to tax and investment advice, and unreimbursed employee business expenses of mileage, equipment, education, and supplies. Keep track of these expenses in your file, or better yet, input the year’s transactions into Quicken and you can transfer the files to TurboTax with the press of a button.
Following these easy tips will help you get more money and boost your next tax refund. Check back for more tips on how to increase next years tax refund.