How To Get The Most Money Back On Your Tax Return Investopedia Monday, March 19, 2012
One of the primary concerns on taxpayers' minds during the tax season is how to get the most money back or pay the least amount of income tax when they file their tax returns. Unfortunately, many people tend to do little to no research, which can cause them to pay more income tax than they really owe. To help you avoid making such a mistake, this article will touch on some of the ways you get the most out of your tax return.
Claim All Deductions
Deductions, in a nutshell, are reductions of your taxable income. Most taxpayers tend to focus on the common and well know deductions, but there are several uncommon deductions for which you may be qualified. Examples include:
Fees and dues to professional societies: You might have paid these fees to maintain your membership for professional purposes, such as maintaining a professional certification, maintaining your membership in a civic or public service organization or your membership in a business league.
Educator expenses. If you are an eligible educator, and you use your own money to buy needed items for your students, you can deduct up to $250 of qualified expenses.
Job search expenses. You can deduct expenses related to job-searches - even if you did not get a job - as long as the job you were looking for is one in your present occupation.
Travel expenses. If you had to travel away from home on a temporary assignment for work, you might be able to deduct related travel expenses.
Charitable donations. If you made donations to charitable organizations such as the Salvation Army, the value of the items donated is deductible. Be sure to keep receipts for your donated items as the IRS requires that you have written confirmation for all charitable donations.
These are just a few of a long list of items for which taxpayers may claim a deduction if they are eligible. You may need to meet special requirements, so be sure to check and make sure you are eligible before claiming any of these items on your tax return .
Credits provide a reduction of the
amount of income tax that you owe, and are usually more effective in reducing the amount of income tax you owe. Available credits include the following:
The Earned Income Tax Credit: This is for individuals who earn less than $9,078 from wages, self-employment or farming.
The Child and Dependent Care Credit. This is for expenses paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent, while you work or look for work.
The Child Tax Credit. This is available to you if you if have a qualifying child, and can be claimed while you claim the Child and Dependent Care Credit.
Education tax credits: This can help to offset the cost of education.
If you are eligible for these credits, they can add up to significant amounts and might result in you receiving a larger tax refund than you expensed.
Should You Itemize?
Something that every taxpayer should take into account is whether or not he or she should itemize deductions. Generally, you should itemize your deductions if it results in a lower taxable income than if you claim the standard deduction. However, there are certain cases in which you will have no choice. For example, if you file a joint return with your spouse and you itemize your deductions, you spouse must do so as well. Itemizing your deductions is recommended if you:
Had large uninsured medical and dental expenses Paid interest or taxes on your home Had large unreimbursed employee business expenses Had large uninsured casualty or theft losses Made large charitable contributions
As is expected, there are limitations on some of the itemized deductions that you can claim. Following the instructions for filing your tax return can help you to determine these limits.
The Bottom Line
There are special rules that apply to claiming deductions, credits and filing your tax return in general. The IRS provides a wealth of information on its website at www.irs.gov. This includes the instructions for filing you tax return, Publication 17 and Publication 529. In some cases, it may be necessary to get professional help. Professional help may seem expensive, but may be worth it if it means getting a larger tax refund or paying less income tax .