How to Plan for Your Taxes to Get a Big Tax Refund Every Year?

Over the past 4 years, the IRS has handed out an average tax refund of $2,600 to eligible taxpayers. For the tax year 2020, the IRS says that it paid an average of $2,827 in tax refunds. That is, by no means, a small amount and you can ensure that you get a refund in that range every year by planning for your taxes right.

Fortunately, you do need to be finance-savvy to claim a refund from the IRS. Neither do you have to read all 4 million words of the Tax Act. Follow these simple strategies and get maximum refunds after filing your taxes every year.

1. Withhold more as taxes using the W4

Form W4 allows your employer to withhold a certain amount from your paycheck as income tax payable to the IRS. You decide the amount you wish to withhold by filling out the W4 and your employer automatically deducts that amount every month. Now, if you are someone who finds it difficult to save from what you earn, withholding more through the W4 is the best way to get a tax refund. You are basically asking the IRS to keep the extra money for you for the time being and give it back at the end of every tax season.

2. Weigh standard and itemized deductions precisely

Most taxpayers miss out on the benefits of itemized deductions because they are more complicated to file. Standard deductions are simpler to fill out and thus people opt for the same. However, to maximize your tax refund, you must spend time weighing standard deductions against your itemized deductions. If 2021 has been a year where you paid student and home loans, had a hefty medical bill, made charitable donations, and more, your itemized deductions can outweigh the standard one. So, sit down with all your bills every tax season and repeat these calculations.

3. Keep yourself up to date with tax credit news

Again, most taxpayers do not claim the tax credits they are eligible for because they do not know about the same. Yet, tax credits are the best ways to reduce your tax bill because credits are subtracted from the tax payable on a dollar-to-dollar basis and are entirely refundable. For the year 2021, Child Tax Credit has been increased to $3,000 from $2,000. The Child and Dependable Care Credit has also seen a massive hike. Make sure you benefit from these by filing your taxes appropriately to get a massive refund.

4. Save in non-taxable instruments

We all save some money from our paychecks and hardly any of us stash dollars under our beds. We usually keep our money in the bank or invest in stocks or other such instruments. Now, all the returns that we get from these financial instruments are taxable. We have to declare in our tax return the interest we received from banks or the capital gains the stocks had. But the IRS exempts the proceeds we make to the 401(k) accounts. By saving here, we can reduce our taxable income and thus, the net tax we have to pay every year.

In all, tax refunds are bonus money that we get at the end of every tax season. And it only makes sense to use the refund money wisely because we indirectly saved it throughout the year. The best investment you can make with the tax refund is in a new used car. You can pay the required down with tax refund cash and take ownership of a quality vehicle that you have been waiting for all this time.

At Family Auto, you can find used cars in Anderson in all price ranges. You can finance the vehicle with as low as $500 down and get started with an easy bad credit auto loan. If you use your tax refund money, your savings remains intact while you go home with a quality used car with a comprehensive 2 years/36,000 miles warranty.