Tax season can be stressful since there’s a lot of work to be done and paperwork to go through. However, once you get a refund at the end of it all, putting in the time and effort is well worth it.
Keep reading for a few general tips on how to maximize tax returns for you and your family!
401(k) investment accounts are for retirement. Any contributions that you make to them will reduce your total taxable income, which can boost the size of your refund. The idea is that you’ll pay taxes on the money in your 401(k) decades later when you retire and start withdrawing.
Of course, there are limits to what you can contribute. In 2019, the limit was $19,000, while in 2020 it will be $19,500.
Much like a 401(k), putting money into a Health Savings Account (HSA) will reduce your total taxable income. Not everyone qualifies for an HSA, however.
You need to have a High Deductible Health Plan (HDHP), which has at least a deductible of $1,350 for individuals and $2,700 for families before you can start an HSA. If you qualify for an HSA, however, you can put in $3,500 as an individual and $7,000 for families each year.
This can be a substantial deduction from your taxable income, especially when combined with the contributions you make to your 401(k).
An often overlooked deduction is for miles driven for charitable or medical purposes. On your 2019 return, you can deduct 14 cents per mile driven for charitable purposes and 18 cents for every mile you drive seeking medical treatment.
While this may seem like very little, it can quickly add up if you volunteer every week or have to seek medical treatment on a regular basis.
Another way to boost what you get back from your tax returns is to donate to a charity. Financial donations are the simplest, and you’ll get a tax receipt that you’ll need to hold on to. You don’t have to donate money to get a boost in-kind donations of physical goods or event space are also eligible to be deducted from your return at fair market value.
Thinking ahead to tax season is how to maximize tax returns. Financial planning takes time and doing your donations and contributions early helps avoid a rush at the end of the year.
While the above tips are a good way to boost your returns, they are far from an exhaustive list. Consider speaking to a tax professional. They’ll be able to maximize your return and ensure that you get the largest possible refund once April rolls around.
Want more information about financial planning and the upcoming tax season? Take a look at the rest of our blog!
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