Come tax season, everyone wants to get the biggest tax return they possibly can. But, without proper research and/or professional assistance, many people end up paying more than they truly owe. There are many extensive resources online to help you with your tax return, but here’s a good place to start.
Deductions vs. Credits
A deduction is a qualified expense that is subtracted from your taxable income. This can include donations to charities, business travel expenses, job search expenses and more. A credit is subtracted directly from the amount of income tax that you owe, making credits much more effective than deductibles when it comes to increasing your tax return. Ask a professional if you’re eligible for tax credits if you have a child in college, if you’ve made energy-saving home improvements and more.
Itemizing vs. Standard Deduction
Most Americans enjoy the ease of simply using the standard deduction, but many people can save more by itemizing their deductions. Young, single individuals may not need to itemize, but you should consider it if you’ve made significant charitable donations, had unreimbursed business travel expenses, paid property taxes and more.
IRA contributions not only help you plan for retirement, but they also reduce your taxable income. If you have a Roth IRA account, you may be able to claim the retirement savings contribution credit when preparing your taxes. Either way, your savings could help you receive a bigger tax refund.
If this all sounds like gibberish to you, it’s best to seek assistance from a tax professional to ensure that you’re not overpaying and that you get back as much as possible.