- Days left

How to Turn This Year's Tax Refund Into Bigger Tax Savings Next Year

×
business man holding income tax ...
Ryan Jorgensen/Shutterstock
Tax season is upon us. Perhaps filing your taxes was a painless process that you finished over a month ago. Or maybe the mere mention of "filing" and "taxes" causes a strange gagging sensation in the back of your throat. But whether you love tax time (accountants) or hate it (everybody else), there's no avoiding it. Fortunately, for many of us there's a silver lining to all the blood, sweat and tears -- the tax refund.

It's strange, because the tax refund feels like free money from the government, although the reality is it's money you worked hard to earn last year. Yet it still feels pretty amazing to get a fat check with your name on it, regardless of where it came from. But what if you could use that money to get an even bigger refund next year? Well, you can. And here are a few ways to do it:

Buy a house. Well, only if it makes sense. If you're planning to buy or sell a home in 2014, don't miss out on the deductions just begging for your attention.
Property taxes and the interest you pay on your mortgage are just a couple of deductions to look for. And if you're selling? The profit you make on your home is tax-free.

Invest in your child's education. Whether you've got a screaming toddler or a bright-eyed college freshman, tax benefits are at the ready for you. Tuition, fees and loans are all eligible for deduction by current students (or their parents). And if you have a toddling 1-year-old like we do, your state likely offers a deduction for the contributions you put toward a 529 plan.

Have a baby. If you're planning to add to your brood this year, you'll be able to claim a $3,900 exemption (as of 2013) per child. And to think my parents said I had to earn my keep when I was growing up. With an exemption like that, I think I was earning it just fine. (Just kidding, Mom.) There's also a Child Tax Credit of up to $1,000 per child which many also qualify for.

Donate to charity. If you're on the fence about giving away your collection of Hawaiian button-downs, do the right thing and burn them. But if you have anything else you want to donate, including straight cash donations to your favorite charities or churches, don't forget to keep track so you can deduct that amount at the end of the year.

Open a traditional IRA. The benefits of retirement savings aren't all reserved for your 65th birthday. Consider donating up to $5,500/year to an IRA, and you may be able to deduct the amount from your taxable income. If you're filing jointly, you and your spouse can each donate $5,500, for a potential deduction of $11,000.

So when that tax refund arrives at your doorstep this year (or perhaps it already has), see what it can do for you. And come tax season next year, maybe your gag reflex won't be so strong.

Joanna and Johnny are the writing duo behind OurFreakingBudget.com, a personal finance blog documenting the joys, pains and realities of living on a budget.


More from Joanna & Johnny


Increase your money and finance knowledge from home

Timing Your Spending

How to pay less by changing when you purchase.

View Course »

Managing your Portfolio

Keeping your portfolio and financial life fit!

View Course »

TurboTax Articles

Will Medicare/Medicaid be Impacted by ACA?

The Affordable Care Act put in place significant tax-related programs that impact Medicare and Medicaid, such as increased Medicare taxes on earned and unearned income for high-wage earners, and Medicaid changes that increase the number of insured individuals. Establishing whether you are affected by the ACA-imposed taxes, or are eligible for certain health programs that fall under the Centers for Medicare and Medicaid Services, is determined by filing your income tax.

8 Things You Think Are Tax Deductible That Aren't

There?s a fine line between looking to save money on your taxes and taking deductions that will raise eyebrows at the Internal Revenue Service. Some taxpayers are tripped up by expenses that they assume are tax deductions, but don?t qualify under IRS guidelines. Here are a dozen items that can lead to unpleasant surprises in case of an audit.

Essential Tax Forms for the Affordable Care Act

The Affordable Care Act (ACA), also referred to as Obamacare, affects how millions of Americans will prepare their taxes in the new year. The law now includes penalties for all who haven?t obtained health insurance -- and those penalties are expected to be paid at tax time. The ACA also provides tax credits to help people pay for insurance, and you can claim those credits when you file your taxes. The Internal Revenue Service (IRS) has introduced a number of tax forms to accommodate the ACA.

How to Determine if You Have Minimum Essential Coverage (MEC)

The Affordable Care Act, also known as Obamacare, requires most Americans to have health insurance that meets a government standard known as "minimum essential coverage," or MEC. Whether your insurance qualifies as MEC depends not on the plan itself, but on how you obtained your coverage.

What are 1095 Tax Forms for Health Care?

In 2014 the Affordable Health Care Act, also known as Obamacare, introduced three new tax forms relevant to individuals, employers and health insurance providers. They are forms 1095-A, 1095-B and 1095-C. These forms help determine if you need to comply with the new shared responsibility payment, the fee you might have to pay if you don't have health insurance. For individuals who bought insurance through the health care marketplace, this information will help to determine whether you are able to receive an additional premium tax credit or have to pay some back.

Add a Comment

*0 / 3000 Character Maximum

Comments

Filter by:
alfredschrader

I just invented Facepad. It's quicker and easier than Facebook.

March 11 2014 at 2:10 PM Report abuse rate up rate down Reply