With tax season in full swing, you may be wishing for just a few more tax breaks to boost your 2014 refund. And while there isn't too much you can do right now (after all, it is 2015), there are a few ways you can still boost your tax return and get a head start on your 2015 tax planning at the same time. And it can be as simple as saving your money in a different, more advantageous place, or taking a second look at your filing status.
With that in mind, here are three strategies from our tax experts that can help you boost your refund as well as help you plan better going forward.
Matt Frankel: There are only a few ways you can really change your 2014 tax liability at this point, but one great way is to maximize your traditional IRA contributions.
Unfortunately, if you invest for your retirement with a Roth IRA, this doesn't really help you out in terms of your current taxes, but the effect of traditional IRA contributions on your tax refund can actually be rather large. And, the IRS allows you to make contributions for the 2014 tax year all the way up to April 15 of this year.
To find out if you're eligible to deduct your traditional IRA contributions, there are a few income and employment-related criteria you must meet. First off, if you (and your spouse, if applicable) are not covered by a retirement plan at work, your contributions will be deductible. If your spouse is covered, but you are not, you can deduct all of your contributions if your combined income is less than $181,000 in 2014, and if you are both covered, your income needs to be below $96,000 to take the full deduction. And finally, single filers who are covered at work and made less than $60,000 can take the full deduction.
For 2014 (and 2015) you can contribute an annual maximum of $5,500 ($6,500 if you're over 50), and your brokerage should give you the option to select which tax year you want your contribution to count toward. And depending on your marginal tax rate, bumping up your contributions now could mean hundreds, or even thousands added to your tax refund.
Dan Caplinger: The problem with last-minute tax planning is that there are only a limited number of ways to do anything to boost your 2014 tax refund at this point. Most of the good opportunities to reduce your tax liability go away after Dec. 31, so unless you can open an IRA or fund a Health Savings Account (both of which you can do until April 15 of this year if you qualify), you might want to focus instead on boosting your 2015 refund.
One question to ask, though, is whether you really want a refund at all. Alternatively, you could adjust your withholding to give you bigger paychecks throughout the year, letting you use your money sooner and avoid giving the IRS an interest-free loan of your hard-earned money. If you've had too much withheld from your paychecks in your past, ask your employer for a copy of Form W-4, which you can use to recalculate how much money is taken out of your pay for taxes. By using the worksheet to determine the proper amount of what are known as withholding allowances, you can reduce the amount that your employer withholds, increasing your take-home pay. True, you won't get a big refund at the end of the year, but that might be well worth getting the use of your money that much sooner.
Selena Maranjian: This won't work for everyone, but some people can increase the size of their 2014 tax refund by changing their filing status. When you're married, for example, you can choose to file your tax return jointly or separately. For most couples, filing jointly is the money-saving move -- and the vast majority choose that option. But there are situations where filing separately can save you money and boost the size of your refund.
Filing separately can make sense if there's a wide earnings disparity between the two members of the couple, and if the member who earns a lot less also has a lot of deductions. That's because the extent to which many deductions are allowed is generally tied to one's adjusted gross income (AGI). Thus, if a low earner has hefty medical expenses, or business-related expenses, or even job-hunting expenses, then they may be able to deduct a lot more when filing separately than jointly.
Single people aren't out of luck, either, as some of them may be able to file as head of household -- if they had at least one child living with them for more than half the year and they paid more than 50% of the costs involved in maintaining the home for the child (such as housing and food).
Even childless single people might qualify, if they support one or more parents by paying more than half of the parent(s)' living expenses (no matter where the parent(s) may live). By filing as head of household instead of single, a taxpayer will pay a lower tax rate and will get to take a bigger standard deduction. The standard deduction in 2014 is $6,200 for single filers and $9,100 for heads of households.
It's smart to consult a tax pro about what your best move is, or to use tax-prep software that can easily show you which choices will result in the lowest tax bill.
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