Every year, millions of Americans expect to receive a large refund check soon after filing their tax returns. In today’s complex tax environment, it is essential to have the guidance of a tax expert to ensure that one stays compliant with tax laws and regulations while maximizing benefits and minimizing tax liabilities, we reached out for US tax advice to an expert in American expat taxes in Dubai, UAE Derren Joseph.
The IRS has a lot of tools to help taxpayers maximize their refund. However, many people may not know how to take advantage of these opportunities.
Donate to Charitable Organizations
Donating to charitable organizations is a great way for business owners to give back to the community and save money on their taxes. It also gives businesses a sense of pride and helps improve employee morale.
The IRS allows donors to deduct up to 30% of their adjusted gross income (AGI) for gifts to public charities. Private foundations have their own deduction limits.
Before you donate to a charity, check the IRS’s exempt organization database to make sure it is eligible for tax benefits. It’s also a good idea to keep records of donations that can help you substantiate your tax return at the end of the year.
It’s also a good idea to check the charity’s mission and programs. If they don’t have a clear goal, they won’t be able to use the donations you donate effectively.
Donate In-Kind Items
Nonprofits rely on donations to fund their programs and help serve those in need. They also depend on in-kind donations, which include goods and services that can be used to further their missions.
These can include physical items like furniture, equipment and office supplies as well as intangible property including copyrights, patents and royalties. They can also include professional services like legal help, accounting work and IT expertise.
In-kind gifts are valuable because they allow nonprofits to operate without having to spend cash. But they also pose a challenge when it comes to figuring out how much to donate and what items will be most useful.
In-kind donations must be recorded and acknowledged. This is typically done by sending a donor acknowledgment letter that includes your tax ID number, the date you received the donation and a description of what the donor donated.
File as Married Filing Separately
If you live in a community property state and want to avoid having your spouse pay half of your taxes, it may make more sense for you to file as married filing separately. That’s because state law determines how income and deductions are divided across separate returns.
This tax status can be beneficial in some situations, but you need to understand the benefits and drawbacks of filing as married filing separately before you decide whether it’s right for your particular situation.
For example, if one of you has a lot of out-of-pocket medical expenses that can be deducted at 7.5% of your adjusted gross income, it may make more sense to file as married filing separately than to file as married filing jointly.
Additionally, if your spouse owes back taxes or has a student loan or child support obligation, it may be worth choosing the married filing separately status to prevent the IRS from seizing your refund. The Treasury Offset Program can be used to offset tax refunds in cases where your spouse owes back taxes.
File as Head of Household
Every year, millions of Americans expect to receive a sizable refund check soon after they file their tax returns. Changes in tax laws over time can influence the size of typical refunds, but there are plenty of ways to maximize your refund and boost your chances of receiving a bigger check.
One of the most important steps you can take is to determine your filing status. Choosing between itemizing your taxes or taking the standard deduction can have a big impact on the amount of your refund.
When it comes to itemizing, there are several items you should consider, including medical expenses, charitable contributions and mortgage interest. Also, look for any other deductions you may qualify for, such as business expenses and home office expenses.
For instance, you might be able to claim a child or elderly parent as a qualifying dependent. This can help you maximize your refund by claiming a higher standard deduction and lower tax brackets than you would otherwise.