All business owners look for ways to reduce their tax liability. Finding some smart ways is difficult as taxation involves a lot of complexities. However, with a detailed tax filing approach, strategic planning, and expert help from a CPA firm in Colorado, you can increase your tax refunds. In this article, we have listed some innovative ways to improve your tax refund in the upcoming tax season. So, without any delay, let’s dive in!
Table of Contents
6 Smart Ways To Increase Your Tax Refund
1. Choose the best filing status
If you want to increase your tax refund, the best way is to choose the right filing status. There are five major categories: head of household, single, married filing jointly, qualifying widow, and married filing separately. Based on your filing status, you can enjoy tax redemptions. For example, if you file tax separately from your partner, enjoy more tax deductibles.
2. Itemize your deductions whenever possible
Generally, all taxpayers go by a standard tax deduction; you can benefit from itemizing your deductions. For example, if you have bought a house recently, you can itemize your taxes. It is only advised to itemize your deductions if they result in more than the standard deductions.
3. Make a retirement contribution
Making a retirement contribution is counted under tax deductibles. You transfer your money into the IRA or individual retirement account and reduce your tax liabilities.
4. Claim tax credits
Claiming tax credits reduces your tax bill. Some common tax credits you can claim include child tax credit, child and department care credit, earned income tax credit, electric vehicle credit, energy-efficient home improvement, and more.
5. Add to personal health savings account
Adding into HSA or your personal health savings account are tax deductibles. According to the updated laws, individual taxpayers can add around $3,650 to an HSA, whereas people above 55 years can contribute $1000 extra. Families can add nearly $7,300.
6. Hire a tax professional for expert advice
Another excellent way to increase your tax refund or reduce your tax liability is by hiring a CPA or getting expert advice. They guide you on how to save your money and get a maximum refund.
These are some of the smartest ways to increase your tax refunds. By following these, you can reduce your tax liability and improve cash flow in the business.