Maximize Your Tax Returns With 5 Essential Strategies From Tax Advisors

If you want to maximize your refund or reduce the amount you owe, it’s important to understand key write-offs and credits. A financial advisor can help you set up the proper tax withholdings throughout the year.

It’s also vital to know whether to itemize or take the standard deduction based on your filing status and other factors.

Review Your Tax Deductions and Credits

Tax deductions lower taxable income, and their value depends on the individual’s marginal tax rate. By comparison, tax credits directly reduce a person’s tax liability.

Capitalize on eligible deductions by making the most of retirement contributions, maximizing health savings account contributions, and claiming energy-efficient home improvements. Also, consider itemizing deductions if expenses like mortgage interest, medical bills and charitable donations add up to more than the standard deduction.

As for credits, take advantage of all eligible ones like HRA, LTA and foreign tax credits. Remember, these deductions and credits come with eligibility rules, subject to change year-to-year. Therefore, it’s important to stay informed of the latest practices and seek out professional advice.

Review Your Filing Status

It’s important to have Wichita Tax Advisors look at your return each year to ensure you are filing correctly. This can reduce the likelihood of having your return flagged for review, which could result in a smaller refund check.

It can also maximize your refund by determining whether it makes more sense for you to file separately or jointly. This can be an especially good idea for high earners who suspect their spouses are hiding income or people whose combined adjusted gross income makes itemization impossible.

Taking advantage of any energy tax credits available is also a good idea. These can offer significant savings on utility bills and make a big difference in your tax refund.

Optimize Your Withholding

Tax time is always a big headache. But with effective planning strategies, you can minimize your tax liability and snag a bigger refund next year.

One of the best ways to maximize your refund is to increase the amount withheld from each paycheck throughout the year. This ensures you’re paying the proper taxes instead of overpaying and receiving a large refund.

Another way to reduce your taxable income is to take advantage of deductions like medical expenses, dependent care and home energy efficiency improvements. Also, consider contributing to a pre-tax retirement account such as an IRA or an employer-sponsored retirement plan. By doing this, you’ll pay fewer taxes throughout the year and receive your investment back in a larger refund. You can even donate to charity using your refund through a donor-advised fund.

Maximize Your Retirement Accounts

Whether you’re just starting to save for retirement or are already well on your way, there is always time to improve your nest egg. And thanks to compounding interest, even a small increase in savings can lead to big balance gains over time.

If you work at a company with a traditional 401(k), your employer may match your contributions to a certain percentage of your pay. This money comes out of your paycheck before federal income tax is assessed, and the investment earnings are allowed to grow tax-deferred until you withdraw them during retirement.

An individual retirement account (IRA) provides more investment options than your workplace plan, but they come with their fees. Work with an advisor to reduce these costs and maximize your returns.

Take Advantage of Business Deductions and Credits

Many small business owners must remember to track expenses that can be deducted, leaving thousands in tax savings on the table. For example, the plumber, Joe, can claim several fees associated with his business, including advertising costs. Still, he must remember that painting his office is a deductible expense.

Credits and deductions reduce the tax you owe by changing your taxable income, while deductions directly lower your tax liability. Businesses can significantly lower their tax liabilities and boost their refunds by maximizing credits and deductions. Companies should review all potential deductions and credits with fresh eyes to maximize their returns. The experienced tax advisors at BAS Advisory Solutions stay up-to-date with the latest tax regulations and ensure that businesses take full advantage of all available deductions and credits.

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