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How to Maximize the Money from Your Tax Return

How to Maximize the Money from Your Tax Return
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Filing your taxes is a yearly occurrence that most Americans dread. But this routine doesn’t have to be a drag when you understand how to file them—and how to garner the biggest return on your form. From choosing a tax form to filing its items, here is a list of the ways in which you can maximize the money you get from your tax return.

Understanding Which Tax Form to Use

The first step to a bigger tax return is to choose the correct tax form. The oldest tax form is the 1040, followed by the 1040a, and then the 1040ez.

What are the differences between 1040 vs 1040a?

There are some differences in who can use the 1040 or the 1040a. Most people are able to use the 1040 form, but those who must use this form include people:

  • Who are self-employed and made more than $400
  • With taxable income above $100,000
  • Who earned tips and did not report them on the W-2
  • Who received income from an estate, partnership, or shares from an S corporation

The 1040a covers those who:

  • Have an income less than $100,000
  • Have income from tips, wages, or salaries
  • Retirees whose income does not come from a job

Both of these forms allow you to claim dependents, which can increase your tax return. These dependents are mostly children, but relatives or other people for which you contribute 50% or more of their income can also qualify as dependents.

The 1040ez is simpler than these two forms. You must have also made less than $100,000 in income, but this income can only come from tips, wages, or salaries, interest, fellowship grants and scholarships, and unemployment benefits. 1040ez forms do not allow you to claim dependents on the form.

Choosing a Filing Status

On your tax return form, you have the option to file jointly or as an individual. Most married couples file joint taxes, but this is not always the best option to receive the most money from a tax return. Married Filing Separately is more complicated than filing a joint return, but it can yield more money depending on the “AGI” or adjusted gross income of each deduction.

If you or your partner have more medical expenses or lost their job, there can be a larger tax deduction from the partner with a job or less medical expenses. However, you should determine whether or not this deduction will be greater than the average deduction when filing jointly.

Itemizing Your Deductions

You cannot itemize deductions on the 1040a, so if you are planning on filing with that form, this tip will not help you. Driving miles for medical or charitable reasons are deductible on a tax return. You should keep a list of all the miles and the average cost of these miles driven because they can help you get a bigger tax return in the future.

Contribute to Your 401k

Putting money into an individual retirement account (or IRA), such as a 401k, reduces tax deductions because these contributions are not taxed until you withdraw them after retirement. The deadline to contribute to an IRA is April 15th to reduce taxes for the previous year. In 2019, the contribution limit for an IRA for the amount to be tax deductible is $6,000.

Hire a Professional

If the language surrounding your tax return still seems confusing, hiring a professional to help file them may be the best option. A professional can weigh the pros and cons of filing jointly or separately, which form to use, and other helpful tips and tricks for you to both save your money and increase the amount of money you will receive from the government in any capacity.