Nov 28, 2021
Five ways to boost your tax refund or reduce your bill before the end of the year
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THE 2021 tax year is soon coming to a close.
It's time to use the last few weeks to make sure your finances are in order so that you can see a refund or, at least, not owe the IRS money.1Make sure you don't miss out on any tax breaks to boost your refund
The 2021 tax year ends on December 31, 2021.
Planning ahead assures you file an accurate tax return and avoid processing delays that can slow your refund.
If you want to make sure you maximize your refund, it's important to put the time into outlining where you've been spending your dollars and how you've been saving.
Most income is taxable.
Gather your income documents to see if you're eligible for deductions or credits.
Additionally, people who need to reconcile their advance payments of the child tax credit and premium tax credit will need their related 2021 information.Most read in moneyCASHING IN Demand for December stimulus payment after families sent 'surprise' $8,000 cashXMAS TOP-UP ‘Surprise’ & bonus stimulus check updates – States proposing ‘holiday cash’FREE MONEY Couple's Christmas bonus - $400 stimulus check proposed by stateFESTIVE BOOST? Christmas bonus $200 stimulus checks proposed for those earning under $75KXMAS HELP Food stamp claimants can get up to $95 extra each for ChristmasFOOD STAMPS $182million worth of food assistance is going unused - are you eligible?
Those who received third economic impact payments and think they qualify for an additional amount will need their stimulus payment and plus-up amounts to figure and claim the 2021 Recovery Rebate Credit.
Here are some tips which may get you a bigger refund.1. Filing status
The relationship you are in, or not, on December 31 determines your status for the whole year.
There are five filing statuses: single, married filing jointly, married filing separately, head of household and qualifying widow(er) with dependent child.
You can only file head of household if you are unmarried on December 31, 2021, paid more than 50% of the costs of maintaining your home in 2020, and have one or more dependents living with you for at least six full months in 2020.
Head of household usually gives you a tax advantage over single filing status.2. Tax deductions
Make sure you don't miss any tax breaks.
Deductions come off your gross income, reducing your adjusted gross income (AGI) and the amount of money you have to pay taxes on.
Popular deductions include medical costs, charitable donations, prepaid interest on a mortgage and education expenses.
If you can account for all your deductions, you could put yourself in a lower tax bracket.3. Retirement and savings accounts
Don't leave behind any money.
If you have a 529 college savings plan, contribute as much as you can during the tax year to reduce your tax burden.
If you can, use all of your flexible spending account (FSA) money by December 31.
Plus, you were allowed to contribute up to $6,000, or $7,000 if you're 50 or over, to your traditional and Roth IRAs by April 15, 2021.
Also, you can contribute up to $19,500 to your 401K plan in 2021 to maximize your 2021 tax refund.4. Tax credits
A tax credit reduces the amount of tax you owe to the IRS on a dollar-for-dollar basis.
Some credits may even be refundable, which means you can claim them even if you don't have any tax liability.
Tax credits include the earned income tax credit which you can earn up to $6,728 for three or more qualifying children.
There's the child and dependent care credit, up to $4,000 for one qualifying person and $8,000 for two or more qualifying persons.
The child tax credit was expanded up to $3,600 for each qualifying child in tax year 2021.
You can also get credits for making energy efficient changes to your home.5. Charitable contributions
The law permits individuals to claim a limited deduction on their 2021 federal income tax returns for cash contributions made to certain qualifying charitable organizations.
The IRS says nearly nine in 10 taxpayers now take the standard deduction and could potentially qualify to claim a limited deduction for cash contributions.
These individuals, including married individuals filing separate returns, can claim a deduction of up to $300 for cash contributions made to qualifying charities during 2021.
The maximum deduction is increased to $600 for married individuals filing joint returns.
If you're worried about paying your tax bill, we explain how you can reduce it by thousands of dollars.
Plus, how millions of people are still waiting on their 2020 tax refunds.New 'stimulus check' is headed your way, make sure you're enrolled in child tax credits
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U.S. Economy Grew Faster Than Expected at the End of 2021
by Harry Wilmerding
The U.S. economy grew at a faster rate than was anticipated pace in the fourth quarter of 2021, benefiting from solid consumer demand before the slowdown caused by the Omicron coronavirus variant and supply chain disruptions.
U.S. Gross Domestic Product (GDP) grew 6.9% on a year-over-year basis in the fourth quarter of 2021, a 2.3% increase from the third quarter figure, the Commerce Department announced Thursday. Economists surveyed by The Wall Street Journal estimated that U.S. GDP would grow at a just 5.5% annual rate.
Strong consumer spending helped boost growth as Americans shopped for the holiday season earlier than in previous years amid growing concerns of inventory shortages. Personal consumption increased 3.3% in the fourth quarter compared to the third quarter’s 2% jump, according to the Commerce Department.
“The increase in real GDP primarily reflected increases in private inventory investment, exports, personal consumption expenditures (PCE), and nonresidential fixed investment that were partly offset by decreases in both federal and state and local government spending,” the Commerce Department said in the report.
In total, 2021 highlighted the fastest pace of economic growth in nearly five decades, with output growing 5.5% in the fourth quarter compared to the same time period one year prior, the WSJ reported. Thursday’s figure was the highest output gain since 1984 when the figure surged to 5.6%.
Meanwhile, the International Monetary Fund (IMF) slashed its 2022 global economic forecast, saying recovery faces many obstacles, including supply chain disruptions, surging inflation and rising COVID-19 cases. The IMF projected that the U.S. economy would grow just 4% in 2022, a 1.2% decrease from its previous estimate.
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Harry Wilmerding is a reporter at Daily Caller News Foundation.
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