There are several ways you can maximize your tax refund in the coming year, including the following ways:
Contribute to a retirement account: Contributions to certain types of retirement accounts, such as 401(k)s and traditional IRAs, can be deducted from your taxable income. This can reduce your tax bill and increase your refund.
Review your investments: If you have investment gains or losses, consider selling investments (including Crypto) with losses to offset gains and reduce your tax bill. Further up to $3,000 of capital losses (married filers) can be offset against your taxable ordinary income.
Consider itemizing your deductions: If you have a large amount of itemizable deductions, such as charitable donations or medical expenses, you may be better off itemizing your deductions rather than claiming the standard deduction. This can result in a larger tax deduction and a higher refund.
Use tax software or a tax professional: Tax software, can help you ensure that you are claiming all eligible deductions and credits, and a tax professional can provide expert advice on how to maximize your refund.
Check your tax withholding: If you have too much tax withheld from your paychecks throughout the year, you may be entitled to a larger refund. You can adjust your tax withholding by completing a new W-4 form with your employer.
Max out your Health Savings Account (HSA): Contributions to a HSA are tax-deductible and can be used to pay for qualified medical expenses on a tax-free basis. Your contributions will lower your taxable income for they year and may even reduce your overall tax rate.
Consider a charitable contribution: Donating to a qualified charity can be a tax-deductible expense, so consider making a charitable contribution before the end of the year. You will likely need to itemize to claim your charitable donations.
Defer earned income: If you are self-employed or have control over when you receive income, consider deferring income until the following year to reduce your taxable income for the current year. This can be especially helpful if you know your income will be lower in a subsequent year (e.g due to a one time payment or bonus received in the current year).
Accelerate deductions: The flip side of deferring earned income is to accelerate deductions, especially if you are expecting to be in the same or a higher tax bracket next year. By accelerating deductions into the current year you reduce your taxable income.
Consider a home office deduction: If you work from home, you may be eligible for a home office deduction, which can help reduce your taxable income.
Make sure you are claiming all eligible deductions and credits: There are many deductions and credits that you may be eligible for, such as the earned income tax credit (EITC), the child tax credit (CTC), and the mortgage interest deduction. By claiming these, you can reduce your taxable income and increase your refund.
Remember to always consult a tax professional or refer to the Internal Revenue Service (IRS) website for specific tax advice and information.