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Many people are planning to file their taxes early to get their refunds faster and avoid a smaller tax refund next year. Some may receive a smaller return than expected due to numerous causes.
Maximize Your Refund: The Ultimate Strategy to Avoid a Smaller Tax Refund Next Year (Photo: Google)
Strategy to Avoid a Smaller Tax Refund Next Year
Increased savings account interest or side work income in 2023 may reduce refunds. A lesser refund may not be a bad thing, as it means the IRS withheld less money this year, but others may want to avoid smaller tax refund next year.
Increasing retirement account contributions, such as conventional IRAs or 401(k) plans, may raise next year’s refund. By contributing more to these accounts, people may guarantee their retirement finances and receive tax breaks this year.
IRA and 401(k) contribution limits vary by age, with under-50s allowed to contribute $7,000 and $23,000 in 2024. Contribution limits are higher for those 50 and older, increasing tax advantages.
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Maximizing Retirement Contributions for Better Tax Returns
Employer matching payments to 401(k) plans do not count toward the annual contribution cap, encouraging employees to contribute more. While Roth retirement account contributions give tax benefits, they do not diminish current taxable income.
Funding a conventional IRA or 401(k) fully doesn’t guarantee a return, but it may improve it next year. To maximize tax returns and financial security, people should carefully evaluate spending habits and prioritize retirement savings.
To improve their finances, people may also explore credit cards with high cash-back rates and introductory APR deals. The terms and conditions of such offers must be reviewed to ensure they meet financial objectives and circumstances.
READ ALSO: Unlocking Savings: Only 3% Of Americans Utilized Free Federal Tax Filing Last Season
