How can I increase my tax refund? This is a common question that I receive this time each year from clients and friends alike.
The simple truth here is that there aren’t a whole lot of chances to change your tax situation once you’ve passed into the next year. But I didn’t say there weren’t any chances! There are still just a few things we can do before April 15th:
#1 – Contribute to an Individual Retirement Account (IRA)
Anyone with earned income can contribute up to $6,000 ($7,000 if age 50 and up) into an IRA account. This may be deductible depending on the extent to which you or your spouse contributed to a retirement savings plan (401(k) and the like) at work.
And for the self-employed, look into making a deductible contribution of up to 20% of your business income into a SEP-IRA.
Visit Vanguard to open an IRA today.
#2 – Contribute to a Health Savings Account (HSA)
For those with a qualified high-deductible health care plan (HDHP), you are eligible to contribute up to $3,500 ($7,000 for family) into an HSA for 2019.
We have until our tax filing deadline of April 15th to make these contributions. For the IRAs, this is because the amount you can contribute and whether it is deductible is dependent on the results from your tax return. Deductible contributions will reduce your 2019 taxable income and your tax liability…thereby increasing your refund (or decreasing your amount owed). Yeehaw!
To be fair (“to be faaaaaair…”) this won’t put more money overall directly into your pocket, but rather into your future self’s pocket since these are retirement account contributions. But what you are really doing here with these contributions is reducing your taxes by keeping it for yourself instead. You have worked hard for this money and deserve to keep some more of it.
Do this! You deserve it.
For more information on tax-advantaged savings strategies, visit: buckthebudget.com.