About this time every year most of us get a little excited about getting a tax return check from the U.S. Treasury. While it's best to change your deductions to ensure that you are not paying more taxes than you should every paycheck, it's nice to receive a few hundred dollars after the holiday season.
While it is tempting to spend your tax return on the newest gadget, I feel compelled to note that paying down some of your debt or investing it can feel just as rewarding.
While a few hundred dollars might not make a substantial dent in your debt or make a huge difference in terms of your invested capital, the act alone can help develop good financial habits. Making smart financial decisions, such as these, consistently over time will eventually make a huge impact in your finances.
Consult with a Tax Professional
As many of us already know, taxes can be complicated. The complexity of our taxes usually increase as we grow older and acquire more assets (investments, businesses, real estate, etc.). In order to maximize your tax deductions its always a good idea to consult with an expert.
Robust online tax services usually provides all of the tax information than most of us need to maximize our deductions. These services, while more expensive than filing your taxes yourself, make the process of increasing your tax return easy and intuitive. In addition, for people with complex tax needs, Certified Public Accounts can help you increase your tax return.
Contribute to Traditional IRA
One of the best ways to increase your tax return is to maximize your contribution to an Traditional IRA. These Individual Retirement Accounts are a tax efficient way to save (and invest) for retirement. In 2012 the maximum contribution to an IRA is $5,000, however it is set for $5,500 in the 2013 tax year. However keep in mind that, depending on your situation (i.e. have an employer spnsored plan), you might not be able to deduct all or any of your contribution.
Donate Unused Stuff to Charity
Many of us have things laying around that we no longer use. In example, I have a bunch of sporting equipment that I haven’t used in years. Instead of letting this stuff just lay around and collect dust, I donate everything that I haven't used in a while. The IRS allows you to deduct your charitable donations. This allows you to keep your house clutter free and can increase your tax return.
Sell Your Loser Stocks
All of us that have a personal portfolio have a few losing stocks. This is an unfortunate and difficult to avoid situation. Regardless many of us look at losing stocks as an opportunity to make our money back. A losing stock can take a long time to turn around (if it ever does), thus its sometimes a wise decision just to sell it and take a loss.
The losses that you take in your portfolio can be used to offset your winning trades and reduce your capital gains liability. In addition, investment losses can increase your tax return by reducing your taxable income. So take a look at your losing stocks, you might be able to gain from them this tax season.
The easiest way to increase your tax return is to listen to the advice of experts. There are many deductions that you can take to increase the amount that you get back from the U.S. Treasury. I suggest taking as many as you can.