As tax season quickly approaches, it’s time to start taking steps to maximize your refund.
Getting the biggest refund possible will require some early preparation, and it helps to be aware of long- and short-term money management tools and techniques. Ready for some help making sure you get all of the money you’re supposed to? Try these seven tips to give yourself a head start as 2018 rolls around.
Surprise yourself with higher refunds in 2018.
1. File Early
The faster you get your return submitted, the faster you’ll get your refund back. The IRS will soon announce when they can start accepting returns, which is typically in late January, so be prepared to submit as early as you can.
2. Pay Bills by the End of the Year
If you can pay any bills due in January early, they can be factored into your 2017 tax year deductions, potentially increasing your refund. For example, if you have a mortgage and you can make your payment for January before the end of 2017, you’ll increase any deductions you claim for mortgage interest.
3. Know What Deductions You Qualify For
Deductions are what you can use to reduce the amount of taxable income you make, which in turn increases your refund. Some of the most common deductions include:
- Medical Bills: Did you pay for your own health insurance or dentist visits? What about new eyeglasses or even a therapist visit? If your cumulative spending is over 10% of your adjusted income, you’ll qualify for the deduction.
- Charitable Donations: Did you give any money to a charity this year? Received a donation receipt when you donated clothes? Any donation, big or small, can help reduce your overall tax bills. Just keep track of receipts as you’ll need to itemize charitable contributions, and be sure that any money or goods you donate go to a reputable, legitimate organization.
- Student Loan Interest: If you are carrying a student loan balance, whether for yourself or for a dependent, you can deduct up to $2,500 of interest paid.
4. Claim the Earned Income Tax Credit (EITC)
The EITC can help offset higher taxes for people with low to moderate incomes. Whether you are self-employed or you work for someone else, you may be eligible for the EITC; if you have children you can get even more money back. While claiming the EITC may delay your tax refund a bit due to the Protecting Americans from Tax Hikes (PATH) Act of 2015, the potential benefits you can earn include:
- No qualifying child: $510
- One qualifying child: $3,400
- Two qualifying children: $5,616
- Three or more qualifying children: $6,318
Give yourself plenty of time to find money-saving opportunities when preparing your taxes.
5. Claim the Child and Dependent Care Tax Credit
If you need to pay for out-of-pocket child care, you can get a dollar-to-dollar reduction of those amounts credited to your taxes. You must have a dependent child under the age of 12, and you must be paying someone outside of your spouse, the child’s other parent, or another of your dependents for care. You can usually claim up to $3,000 per caretaker, although amounts are based on your income and any other childcare benefits received.
6. Take Advantage of a Flexible Spending Account
A flexible spending account (FSA) is a way for you to put pre-tax earnings aside to take care of medical costs and child or dependent care. An FSA will reduce your overall tax liability so you’ll get the benefit of a potentially higher refund, and you’ll also have dedicated savings for costs related to your health and children.
7. Use Direct Deposit
According to the IRS, eight out of ten taxpayers use direct deposit to receive their refunds. Why? If you direct deposit your refund, you can expect to receive it typically within a couple of weeks, without having to worry about a lost check. With a Green Dot Prepaid Visa® Card, you can receive your refund directly on your card and access your money even sooner.* View Green Dot’s simple fees here.
As with any of your finances, the sooner you get a head-start on your taxes, the easier it will be to complete them. Plus, you’ll increase your chance of a higher refund by giving yourself time to negotiate deductions, credits, and other money-saving opportunities. Make sure you’re ready to receive your refund quickly by getting your Green Dot Prepaid Mastercard® or Visa® Card.