Simple Tax Strategies to Maximize Your Tax Refund
We’re nearing the thick of tax time, and I’m sure the first thing on your mind (I know it’s on mine) is “how much money am I getting back?” and “what am I going to use the money for?” If you’re part of the W-2 crowd and have your taxes withheld throughout the year, you could be getting some money back. If you’re self employed on the side, then you could be in even better shape if you've got expenses and tax deductions that you can take advantage of.
So how can we maximize the tax refund we receive? Can we leverage some of our skills and our assets in order to bring down our tax obligations? Here are a few ideas.
1. Look into self employment options.
If you're self-employed, you can utilize the many itemizations that exist for those in your situation. For instance, even by just taking on one or two freelancing projects during the year, you can already qualify as self-employed, which will allow you to take certain deductions, such as expensing the mileage on the car that you use to do your freelance work. You can also expense meals that you share with clients. Save those receipts and take them to your CPA or tax representative when you are ready to file. You’d be surprised at the expenses that you can write off once you declare self-employed income.
2. Check out real estate tax strategies.
If you own real estate, you can qualify for many tax deductions, including those that you can claim due to paying property taxes throughout the year. If you own a home, you also claim a deduction on your mortgage interest. If you have rental properties, you have to report your rental income, but if you've incurred expenses from repairs and troublesome tenants, those can be itemized and deducted as well. Alternatively, if you rent your apartment or house, your rental payments can be used to offset your taxes as long as you file as Head of Household.
3. Don't forget charitable activities.
You may be eligible for many personal tax write offs, especially if you’re prone to philanthropy. In particular, donating goods to organizations like the Salvation Army, Goodwill and even your local church can yield decent deductions. Make sure you keep your receipts and any forms relating to your donations: if they amount to $250 or more, these will require documentation by the IRS. Keep accurate records of the checks that you write. If you donate cash, something in writing from the charitable beneficiary will be required and you can only claim up to 50% of your adjusted gross income. Be aware that you may not be able to deduct your charitable gift to certain organizations (e.g. political parties and random individuals).
Who Does Your Taxes?
So once we wade through all of this information, we come to how we file our taxes. Do we do it ourselves or do we hire a professional? This of course is a very subjective matter and can really depend on a few things. Some factors that can affect your decision on how you should file include your familiarity with the tax code, how complicated it is to file your taxes, and whether you've got the motivation to do this yourself.
There's a lot of software and online options out there that steer you through the tax filing procedures, but do what’s comfortable for you. For those wanting to try filing themselves, this TurboTax review or this coverage of H&R Block tax services may be helpful.
If you'd rather go with a professional, then ask around for well qualified CPAs or enrolled agents who may quote you a good rate. There are many tax professionals out there and finding a reputable one shouldn't be too challenging. But before you commit to a new service, check them out through the Better Business Bureau to make sure that the service is indeed reputable.