Sometimes, getting your tax refund can feel like getting an end-of-year bonus. However, other times it can feel like you’ve been taxed too heavily. A lot of the time, maximizing your tax refund depends on being smart about how you lodge your tax. It is about finding ways that you can do your tax return so you get a tax refund you’re excited about. Here are eight tax time tips that will help you get more money back.
1. Be Organized
The biggest tip for getting a good tax refund is to stay on top of all tax-related paperwork. Being organized in the lead-up to tax season is going to ensure that you do your taxes correctly and end up with a tax refund worth celebrating. The more disorganized you are, the more likely it is that you put off doing your taxes or get someone else to do your taxes who may not be aware of all the expenses that you can expense. Before you start doing your taxes, or as tax season comes around, gather all the information you might need. This could include: payment summaries, bank statements, investment statements, any proof of foreign income, your private health insurance policy, shares or managed fund statements, details of income received as the owner of a rental property, mileage logs and credit card statements. Keeping up-to-date with this paperwork throughout the year will make it easier to organize the information when it comes to tax time.
2. Check Your Filing Status
Your filing status has an impact on how much money you get in your tax refund. When doing your taxes, if you have a partner, consider whether you want to file jointly and separately and how this may affect your refund. If one of you is behind on certain payments, such as for student loans or medical expenses, you may consider filing separately to ensure that the partner who is not behind on such payments doesn’t have their tax return impacted. If you are single, have been divorced or lost your partner since the previous financial year, your filing status may have changed and you may be eligible for a larger refund.
3. Contribute To Your Retirement
You are rewarded, from a tax perspective, for contributing to your retirement. By maxing out your contributions to your retirement plan, you can put your money somewhere where it won’t be taxed. This means that enjoy a tax deduction of up to $5,500. Depending on how much you are contributing, you may also be eligible for saver’s credit which is when you are rewarded with additional credit for your retirement plan contributions. The amount you put into your retirement remains protected from tax until you retire, so it is a smart financial decision to max out your contributions.
4. Deduct For Donations
Claiming for charitable donations is often something people forget to do when it comes to their taxes. If you make regular contributions to different charities and nonprofits then you may be eligible for some significant tax savings. However, this only applies to some charities, which will usually be stated on their website, and you must keep a receipt or a record of your payments.
5. Deduct For Dependent Expenses
If you are a parent or caregiver, or you have a friend or relative that you support financially, you may be eligible for certain tax deductions. For example, you can deduct for the costs associated with looking after children, parents or other dependents. This includes healthcare and childcare costs.
6. Claim For Work-Related Expenses
You can also claim for work-related expenses, including any home office expenses. You can claim an item that you require in order to complete your job and the tasks asked of you. For example, if you work in hospitality you may need certain shoes or if you work as an accountant you may need certain software on your devices. This can also apply to education costs that relate directly to your job. If you work from home, there are many deductions you can make that you may not be aware of. This includes a portion of house, such as your study or office or an area you meet with clients. This means that if you have a five-bedroom home, and you use one room exclusively as an office, you could deduct up to a fifth of your rent and utilities. You can also deduct different bills, such as internet and phone bills, and the cost of supplies for your office.
7. Keep Track Of Using Your Car
If you use your car for work, to travel to meet clients or to different destinations, then you can claim travel expenses. However, in order to do this you need to keep track of how often you are using your car and how far you are traveling. This means you need to keep a log all year round so that when it comes to tax time you have tangible proof of how often your car has been used for business. If keeping a paper log seems like too much of an effort, there are many apps that you can use that will track your mileage and update your log each time you drive for business.
8. Make Smart Financial Decisions
Your tax refund can help you when it comes to managing your debt and growing your savings, but this relies on you making smart financial decisions. Using a financial comparison website, like RateCity, can help you ensure that you’re making the best decisions when it comes to every aspect of your finances, including your bank account, savings account, loans and credit cards. By being smart financially all year round, you can ensure that your tax refund can be used to help add to your savings or pay off loans and consolidate your debts.
Laura Martins is a content manager for ratecity where you can make smarter financial decisions and compare thousands of financial options. In her time away from RateCity, Laura loves reading about tech and spending time with her dogs.