You may have a few options to increase your refund for the upcoming year, but there is almost nothing that can be done to increase your refund by the time you are working on your tax return. Generally, the only thing that can change your refund after December 31st is to make contributions to a traditional IRA.
Here are some options that we suggest:
- Itemizing deductions instead of taking the standard deduction. Considering the high standard deduction that we currently have; it is difficult for most people to have enough deductions to itemize. Track things like:
- out-of-pocket medical expenses,
- sales tax on large purchases such as a motor vehicle or boat,
- buying a home and paying mortgage interest and real estate taxes,
- making cash donations or donating your used items to a charity, and
- miles driven volunteering with charities. Enter the donations you have each year, and it may end up working out to your advantage.
- Track your business expenses and business mileage for self-employed taxpayers. Business deductions reduce two taxes – self-employment and regular income tax. Having good business expense records can significantly increase your refund.
- Contribute to your employer's traditional retirement plan or a traditional retirement plan with a bank or brokerage. These contributions can reduce your wages on your W-2, or your taxable income on the tax return.
You may also consider changing your Form W-4 at work to have more tax withheld out of your paychecks. Often you can make changes online in your company’s payroll system. If not, you can submit a new W-4 by printing and filling out the form. We recommend you use the IRS withholding calculator while you fill out the W-4. However, keep in mind that increasing withholding from your paychecks decreases the amount of money in your pocket every paycheck.
If you have self-employment income, you can increase how much money you are sending the IRS as an estimated tax payment each quarter. These advance payments will be credited on your income tax return and help lower your tax, which may increase your refund.
When you pay taxes through withholding or estimated tax payments in excess of your tax liability, the money being refunded with your tax return is an interest free loan to the government. Putting that money in savings may be a better option if you need more money throughout the year.
See these articles about why your refund may be smaller this year and how to compare returns.