Most people don’t worry about taxes until their W-2 arrives in January. But if you want a bigger tax refund (and who doesn’t?), there are steps you can take right now to make that happen.
Most of these actions don’t take a lot of time, and the payoff can be huge, so there’s really no reason to procrastinate. Even taking a few of these steps will help.
1. Clean out your closets. Clearing out clutter and donating it to charity can boost your tax refund if you itemize your tax deductions. Every $100 of stuff you donate will increase your federal tax refund around $25, so the savings add up fast. Your donations must be in usable condition and you must establish the fair value. TurboTax ItsDeductible will help you determine the value for most household items.
2. Notify the Health Insurance Marketplace of Change in Income. If you experienced a decrease in income and you purchased health insurance in the Health Insurance Marketplace make sure you notify the Marketplace about the decrease in income. You may get a bigger discount or premium tax credit to help you pay for your insurance.
3. Go solar. Through the end of 2016, you can get a 30% tax credit for solar energy systems, geothermal heat pumps and small wind turbines, even if you spread the payments over a number of years. Spend $10,000 on solar equipment, and you’ll boost your tax refund by $3,000.
4. Contribute to retirement plans. Putting money into an IRA will boost both your tax refund and your wealth. You have until April 15 of next year to contribute to your IRA, but contribute now and your money will have longer to grow. If your employer matches contributions you may want to contribute to your 401(k) instead, and if you are many years away from retirement, a non-deductible Roth IRA may save more taxes in the long run, since the earnings are non-taxable when you draw them out in retirement.
5. Take a credit for child care. If you work, you can claim up to 35% of the first $3,000 of child care expenses ($6,000 for two or more children) until your child turns 13. Nursery school, after school programs, and day care are all qualifying expenses. Summer day camps also qualify, though overnight camps do not. If you pay a relative to take care of the kids, that qualifies as long as your relative reports the income on their taxes and you don’t claim them as a dependent.
6. Take a class. Boost your tax refund by up to $2,000 just by getting educated. You can learn a new career, update your job skills, or take a class on anything you want just for the heck of it. If your income is moderate you may be eligible for the Lifetime Learning Credit as well as college credits. You can claim a tax credit of 20% of all your tuition expenses, so taking courses that cost $500 in tuition will boost your tax refund by $100. You don’t need to be on track for a degree – the cost of any class that you take at the college level is eligible for the credit.