Charles M. Ertel, CPA, LLC 200 Union Blvd, Suite 200 Lakewood, Colorado 80228-1831

(315) 663-1969

Charles.ertel@cpa.com

Charles M. Ertel, CPA, LLC

5 Hidden Ways to Boost Your Tax Refund

As tax season approaches, many individuals and small business owners in Lakewood, CO, seek ways to maximize their tax refunds. While most people are familiar with standard tax deductions and credits, there are hidden strategies that can significantly enhance your refund. By understanding and implementing these methods, you can ensure you’re not leaving Money on the table. Here are five hidden ways to boost your tax refund that you may have yet to consider.

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Rethink Your Filing Status

One of the most impactful decisions you can make during tax season is choosing the correct filing status. Many taxpayers in Lakewood, CO, might automatically select the status they’ve used in previous years without considering the potential benefits of switching. For instance, if you are married, filing jointly often results in a higher refund than filing separately. However, there are scenarios where filing separately can be beneficial, especially if one spouse has significant medical expenses or miscellaneous deductions.

Single taxpayers should also consider whether they qualify for Head of Household status, which comes with a higher standard deduction and potentially lower tax rates. This status is available to unmarried individuals who pay more than half the cost of maintaining a home for themselves and a qualifying dependent.

To determine the best filing status for your situation, consider consulting with a local CPA accountant near me. An experienced business tax accountant can help you analyze your financial situation and choose the option that maximizes your refund. By rethinking your filing status, you could potentially increase your refund significantly.

Embrace Tax Deductions

Tax deductions are a powerful tool for reducing your taxable income, and many taxpayers in Lakewood, CO, miss out on valuable deductions. While most people are aware of standard deductions like mortgage interest and student loan interest, many lesser-known deductions can enhance your refund.

For example, suppose you are self-employed or run a small business. In that case, you can deduct various business expenses, such as home office costs, travel expenses, and even meals related to business activities. If you have made charitable contributions, keep receipts and documentation, as these can also be deducted from your taxable income.

Another often overlooked deduction is for unreimbursed medical expenses. You can deduct the excess if your medical expenses exceed 7.5% of your adjusted gross income.

Consider working with accounting and tax solutions professionals to ensure you take full advantage of available deductions. They can provide insights into specific deductions that apply to your situation, ensuring you maximize your refund.

Maximize Your IRA and HSA Contributions

Contributing to an Individual Retirement Account (IRA) or a Health Savings Account (HSA) can significantly boost your tax refund. Contributions to traditional IRAs are tax-deductible, meaning they reduce your taxable income for the year, which can lead to a larger refund. For the 2023 tax year, individuals can contribute up to $6,500 to their IRA or $7,500 if they’re age 50 or older.

Similarly, HSA contributions are tax-deductible and can be used for qualified medical expenses. For calendar year 2023, an individual CAN contribute a maximum of $3,850 to an HSA, whereas families CAN contribute $7,750. If you are 55 years old or over, you can make an additional contribution of $ 1,000.

Maximizing your contributions to these accounts before the tax deadline can lower your taxable income and increase your refund. If you need clarification on the contribution limits or how to set up these accounts, seek guidance from accountants near me who specialize in retirement and health savings planning.

Remember, Timing Can Boost Your Tax Refund

The timing of your income and expenses can significantly impact your tax refund. For instance, if you are a small business owner in Lakewood, CO, consider accelerating expenses into the current tax year if you anticipate a higher income next year. It could mean making necessary purchases or prepaying certain costs, which can reduce your taxable income for the current year.

Conversely, if you expect a lower income next year, you might want to defer income until the following year. This strategy can be beneficial for freelancers or those with variable incomes.

Additionally, if you are eligible for a tax refund, filing early can expedite the process. Many taxpayers need to pay more attention to the importance of timing when it comes to tax refunds. By strategically planning your income and expenses, you can maximize your refund and ensure you receive it as quickly as possible.

Become Tax Credit Savvy

Tax credits are another fantastic way to enhance your tax refund, and many taxpayers in Lakewood, CO, may need to be fully aware of the credits available to them. Unlike deductions, which reduce your taxable income, tax credits directly reduce the tax you owe, making them even more valuable.

Some common tax credits include the Earned Income Tax Credit (EITC), Child Tax Credit, and education credits. The EITC is particularly beneficial for low to moderate-income earners, as it can provide a substantial refund even if you owe no tax. The Child Tax Credit offers financial relief for families with dependent children, and education credits can help offset higher education costs.

To take full advantage of these credits, it’s essential to understand the eligibility requirements and ensure you meet them. For instance, the EITC has specific income thresholds and filing requirements that must be adhered to.

Working with a small business tax accountant can help you navigate the complexities of tax credits and ensure you claim all you qualify for. By becoming tax credit savvy, you can significantly increase your tax refund and improve your financial situation.

FAQs

Filing jointly as a married couple often yields the most significant refund due to higher income thresholds and deductions.

Maximizing deductions and credits and choosing the correct filing status can lead to a larger tax refund.

Married filing separately typically results in higher tax withholding than filing jointly, affecting your overall refund.

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