With about one month to go before the filing deadline for the 2017 tax year, it’s too late to take advantage of some tax refund strategies, such as making your January 2018 mortgage payment in December 2017 to boost your mortgage interest deduction. Similarly, paying property taxes or self-employment taxes early can also generate tax savings, but those ships have sailed for this tax year.
However, there are still things that the tax procrastinators can do to boost the tax kickback from the IRS. You may already use some of these strategies, but if not, take a closer look to see if they apply to you. No one ever complained that their refund check was too big.
Play the Credit Game
Tax credits have a dollar for dollar effect on your taxable income. One dollar of credit is one dollar less taxable income, so when it comes to boosting refunds, credits are usually more valuable than deductions. Despite this, there are still about one in five taxpayers who skip the earned income tax credit. When you meet the eligibility requirements, you can claim this credit even if you don’t have children. If you do have kids, don’t forget the child care tax credit.
With college-age children, there’s a range of higher education credits, such as the American Opportunity tax credit and the Lifetime Learning credit. Energy-saving home improvements may earn you additional credit claims.
Max Your IRA
Here’s a bit of tax trickery you may not know. You have until April 15, 2018 to open a traditional IRA account for the 2017 tax year. There’s still time to file immediately, claiming this IRA on your return, then funding it with your tax refund, as long as you do it by the 15th. Traditional IRAs reduce your taxable income, so it’s a double-win proposition. And it’s perfectly legal, since your tax refund is your own money being held in trust. There are those who still think it’s some sort of bonus for filing, rather than their own excess payroll deductions.
Take the Deductions
Tax changes affecting the 2018 tax year will make it easier for many to benefit from the standard deduction, rather than going through the extra paperwork that itemized deductions create. However, those changes don’t apply to your 2017 taxes, and it’s still possible to increase the size of your refund by itemizing certain expenses against your taxable income.
If you’ve kept a record of your car’s mileage for purposes such as job interviews, medical appointments and volunteer work, these are allowed as eligible deductions, as are parking fees, highway tolls and taxi receipts. The only restriction is that you can only claim the portion of your vehicle’s use that applies.
If you moved more than 50 miles to take a new job, your deductions can include moving, travel and storage expenses related to that move, as long as you’re employed full-time for 39 weeks or more in your first year. This is an itemized deduction that you don’t need to itemize to lower your adjusted gross income. Use form 3903 and attach it to your 2017 return.
Charitable donations are a well-known way to reduce taxes and boost refunds, however, it’s good to review all the claims you can make. Deduct the ingredients for your bake sale contribution, for example, but don’t deduct the value of your time spent in the kitchen.
Review Your Status
If you’re married and choose to file jointly year after year, you may not be getting the biggest return to which you’re entitled. In some cases, changing your status to married-filing-separately introduces additional tax savings, though it’s more work to complete your return. Some tax filing software will recommend the right way to proceed, but if you’re in doubt, talk to your accountant. If you’re a single parent or a single taxpayer caring for a parent, you may qualify to file as head of household, which adds certain advantages over single filing.