How to Get a Larger Tax Refund This Year
First, to be clear, the goal of any savvy taxpayer is not to get a large refund.
It is to get no refund – while also owing nothing.
In other words, the best outcome is to accurately predict your taxes and have that exact amount withheld over the course of the year, thereby avoiding providing Uncle Sam with a tax-free loan.
On the other hand, if you are leaving money on the table – by failing to secure a refund for proper deductions and credits, you are paying more than your fair share in taxes. This discussion is about making sure you get back all money to which you are entitled.
Most people know about and take advantage of deductions for alimony payments, job-related moving expenses, and contributions to IRA or health savings accounts.
Tax credits for child care, education, and the earned income tax credit, if your salary is low enough, also pop up on the radar for most taxpayers.
Likewise, deductions of student loan interest, mortgage interest, and real estate taxes are easily calculated if you itemize deductions.
Daily Finance, however, offers tips on some deductions often not considered.
Ordinary Investment Losses
If you lost money on the sale of a stock that decreased in value by the time you sold it, you can use that loss to offset capital gains. You can also use those losses to offset up to $3,000 of ordinary income if you are married, filing jointly. If you are married, filing singly, the deduction for you is $1,500.
Section 1244 Stock
If you invested in your own corporation or a closely held corporation that qualifies under “Section 1244,” you can deduct up to $100,000 in losses on a joint return. ($50,000 if you are single.)
Check out IRS Publication 550 for more information on investment income and expenses.
Sometimes stock doesn’t just lose some value. Sometimes it loses all value and becomes worthless. If you own worthless stock, tax law treats you as having sold it on the last day of the year in which it became worthless.
More importantly, you have seven years from the time the stock became worthless to take the deduction. Therefore, if own stock that lost all value in 2006 or later, it is eligible for this treatment.
It’s worth noting that the stock must have zero value. The fact a company files bankruptcy is not enough.
Exception for Gain in Home Sale
If you sold your home in 2013 and it was your principal residence for two of the five years preceding the date of sale, you can exclude income from any gain up to $250,000, if you are single and up to $500,000 if you are married filing jointly.
Most people understand that money they donate to a qualified charity is deductible. There are other “charity-related” deductions as well.
For example, you can itemize donations of clothing and household goods using It’s Deductible online. You will probably discover that the value of your donated items is considerably higher than you thought.
If you drive your car on behalf of a charity, you can deduct your documented mileage at the rate of 14 cents per mile.
Items you purchase for a charity are deductible as well. Keep receipts so you can deduct the cost of the gift. If the amount is $250 or more, you will need written acknowledgment from the charity.
Related: Where To Go For Free Tax Advice
Even More Deductions
Kiplinger lists a number of often-overlooked deductions including a deduction for state sales tax (which expires almost every year but is active for 2013 returns). This is important if your state does not impose a state income tax.
Reinvested dividends are also often missed by taxpayers when calculating the basis for mutual fund shares. The Internal Revenue Service provides information and instructions here.
If 2013 was a year in which you spent a considerable amount of time (and money) looking for work, don’t forget that job-hunting expenses are also deductible.
You Are On Your Own
Perhaps most importantly, the IRS will not find deductions and credits for you. It will gladly keep any funds you fail to claim. Take the time to consider these and other potential deductions and get the full refund to which you are entitled.
© 2016 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.