5 Ways to Boost Next Year’s Tax Refund Now

With the tax deadline behind you, you have likely put taxes out of your mind. But it’s the perfect time to be proactive and start planning for the next tax season! If you want to maximize your tax refund next year, here are some things you can do now:

Adjust your W-4 withholding allowances

If you owed money at tax time, it is time to review your tax withholding from your paycheck and adjust your withholding allowances on your W-4. Adjusting the amounts on your W-4 form based upon your personal situation and latest paycheckwill potentially increase your income tax withholding. While your paycheck may be lower based upon the update, the payoff will come next spring when you don’t owe money when filing your taxes.  Also, if you are receiving a large refund, you can adjust lower, to receive more dollars on each paycheck.

A hand tool to utilize is the IRS Tax Withholding Estimator. You can easily figure out how much you should have withheld on each paycheck. Simply follow the steps in the calculator, print out an updated copy of your W-4 form and submit it to your employer to have the changes take effect with your next paycheck.

Keep track of tax deductions

Organizing documents throughout the year helps ensure you don’t miss any deductions when it comes to tax season. Prepare a file and label it “Current Tax Info”, and tuck it into your desk drawer. Now, every time you see something during the year that’s tax deductible, drop it into the file. Knowing what tax deductions are allowed under the current tax law can help you plan and save at tax-time.

Save for the future

It’s never too early or late to start investing in your retirement. If you haven’t started saving for the future, now is a good time. Here are a few tips to help towards the retirement goal:

a) You can contribute up to $23,000 in 2024 to your 401(k) retirement account. However, if you are age 50 or over you can make catch up contributions up to $7,500, which increases the total contribution to $30,500.

b) You can contribute up to $7,000 in 2024 to your IRA or ROTH IRA retirement account. However, if you are age 50 or over you can make catch up contributions up to $8,000.

c) If you are self-employed, you can contribute to a Simplified Employee Pension (SEP) IRA up to: 25% of your net earnings up to a total of $69,000 for 2024 and your contributions can be deductible as a business expense. You can also contribute up to $76,000 ($78,000 if you are 50 and older) to your IRA and receive a tax deduction for your contribution.

d) Another reason to save is that you may automatically be eligible for the Savers Credit, worth up to $1,000 ($2,000 married filing jointly). The Savers Credit is a little-known tax credit that lower to middle-income taxpayers can get just for contributing to their retirement and because it’s a tax credit, it will reduce the taxes you owe dollar-for-dollar.

Clean out your closets and donate to charity

In addition to creating new space in your life, you can take a quick tax deduction for the fair value (or thrift shop value) of household goods, gently used clothing and shoes, toys that your kids no longer play with, and even furniture you no longer need. If you have books and magazines you give to the library, you can deduct that as a charitable contribution as well. As long as you are able to itemize your deductions, you can use these donations to help reduce your taxable income. Make sure you obtain a receipt for any donations made.

Donate to a Church or Charity

By donating to a church or charity, you not only contribute to a cause you care about but also open the door to potential tax benefits. Donations of cash, checks, or even items like gently used clothing, household goods, and electronics can all be claimed as charitable contributions, provided you have the proper documentation. If you volunteer your time, some out-of-pocket expenses related to your service may also be deductible. As long as you're able to itemize your deductions, these donations can help lower your taxable income. Be sure to request a receipt for any donations, especially for larger contributions, to ensure you can take full advantage of the available deductions.

Following these easy tips will help you get more money and boost your next tax refund!