Here are 10 quick and easy tips you should make before the end of the year to increase your tax refund when you file next year.
1. Gather forms and receipts.
It may seem a little early, but gathering receipts for tax deductible expenses and sources of income for the past year will keep you organized and ensure you don’t forget anything when you sit down to do your taxes.
2. Defer bonuses.
All of your hard work paid off this year, and you are expecting a year-end bonus, but this extra money in your pocket may bump you up to a higher tax bracket and increase your tax liability. If you can hold off on receiving that extra income this year, see if your employer will pay your bonus in January. You will still receive it close to year-end, but you won’t have to pay taxes on it when you file your 2015 taxes.
3. Donate to charity.
The holidays are a great time to get organized for the new year and clean out clothes and household goods while giving to those in need. You can help someone in need and reap benefits of a tax deduction for donations to a qualified charitable organization by Dec. 31. Even if you make a donation by credit card, you do not have to pay it off in 2015 to receive the tax deduction. Don’t forget that you can deduct your mileage (14 cents for every mile) driven to do charitable service if you volunteer at a qualified charitable organization.
4. Take a class.
If you take a course to advance your career you may not only see a boost in your salary, but you may also boost your tax refund. Paying for next quarter’s tuition by Dec. 31 may give you a valuable tax credit up to $2,000 with the Lifetime Learning Credit.
5. Maximize your retirement.
Another great way to reduce your taxable income and build your nest egg is to make a contribution to your retirement savings account. Whether you contribute to a 401(k) or a traditional IRA, you can take a dollar for dollar deduction in your income and also save for the future. The 2015 contribution limit for 401(k)s is $18,000 (or $24,000 if over age 50) and $5,500 (or $6,500 if over age 50) for a traditional IRA. The contribution deadline for 401(k)s is Dec. 31, but you have until April 18, 2016 to put money in your IRA.
6. Take the saver’s credit.
The saver’s credit, also known as the Retirement Savings Contribution Credit, is a special tax break available for low- to moderate-income earners who contribute to their retirement plans. The credit is up to $1,000 ($2,000 if you’re married filing jointly), and you can claim it in addition to your tax deductions for a traditional 401(k) or IRA contribution.
7. Spend your FSA.
If you have a flexible spending account and you have money left, now is the time to take care of those doctor’s visits you’ve been putting off. If you have unused money in your FSA account on Dec. 31, you may only be able to carry over up to $500 into your 2016 FSA. Depending on your plan, there may be a grace period to use your funds in the beginning of next year.
8. Offset investment gains.
If you have been holding on to losing stocks, you can recognize your losses and use them to offset investment winners. In order to take advantage of this, you will need to sell the losing investments and offset your losses against your gains. If your losses exceed your gains, you can apply $3,000 of your loss against your regular income. Any extra will then be passed onto the next tax year.
9. Estimate your household income for health insurance.
Are you applying for a subsidy or discounted insurance in the health insurance marketplace this open enrollment season? If so, you will have to project your 2016 household income and family size when you apply. Start looking into any changes that may take place in 2016 (growing your family, job promotion, heading into retirement, etc.). These changes may affect the amount of the subsidy you are given to help you pay for insurance.
10. Increase your advanced premium tax credit.
If you received assistance for health insurance in the form of an advanced premium tax credit, one smart move you can make is to lower your adjustable gross income by contributing to your retirement plan, which may increase the premium tax credit you’re eligible for at tax time. If you are purchasing new insurance in the marketplace you can also request to take half of your assistance to help pay for insurance upfront and alleviate having to pay anything back if you experience changes to your income.
Source : http://www.dailyfinance.com