Tips for Increasing Your Tax Refund

There’s about three weeks left in the 2011 tax year, which means you’ve still got some time to make last-minute changes that could increase your refund.

Here, IRS spokesman Raphael Tulino sheds light on points to consider and shares tips on what you can do now in an effort to get a bigger payback:

• Charitable Contributions: Make 2011 deductible charitable contributions no later than Dec. 31. Give to a qualified public charity and keep a paper trail. Clothing and household items must generally be in good used condition or better to be deductible. Donations charged to a credit card by Dec. 31 are deductible for 2011 even if the bill is paid in 2012. Taxpayers must be itemizing deductions on a Schedule A in order to benefit.

• Winterize Now, Save on Taxes Later: Homeowners still have some time to make energy saving home improvements and qualify for either of two home energy credits. The Nonbusiness Energy Property Credit is aimed at homeowners installing energy efficient improvements such as insulation, new windows and furnaces. The 2011 credit rate is 10 percent of the cost of qualified energy efficiency improvements and has a lifetime limit of $500, of which only $200 may be used for windows. Qualifying improvements must be placed into service to the taxpayer’s principal residence located in the United States before Jan. 1, 2012. If the total of nonbusiness energy property credits taken in prior years is more than $500, the credit may not be claimed in 2011.The Residential Energy Efficient Property Credit is designed to spur investment in alternative energy equipment. It equals 30 percent of the amount spent on qualifying property such as solar electric systems or solar hot water heaters. 

• Sell the Losers: Check investments and consider a portfolio adjustment. Taxpayers can deduct capital losses up to the amount of capital gains plus $3,000. This deduction is “above the line” so all can benefit.

• Retirement Account Contributions: The maximum 2011 IRA contribution is $5,000 ($6,000 if age 50 or over). Eligible taxpayers can also deduct their IRA contributions. The Retirement Savings Contribution Credit or ‘Saver’s Credit’ is also available to taxpayers who contribute to a retirement plan and whose income is generally less than $56,500. This under-the-radar tax credit may be worth up to $2,000 for eligible taxpayers.

• Consider a Qualified Charitable Distribution: The qualified charitable distribution allows individuals age 70½ or over to exclude from gross income up to $100,000 that is paid directly from their individual retirement accounts (excluding SEP or SIMPLE IRAs) to a qualified charity. The excluded amount can be used to satisfy any required minimum distributions that the individual must otherwise receive from their IRAs in 2011.

• Gift Giving: Taxpayers can give a gift worth as much as $13,000 in cash or property in 2011 to another person without having to file a gift tax return. Gifts to individuals are not deductible.

• Sales Tax Deduction: This deduction allows taxpayers who itemize on IRS Schedule A to deduct state sales tax in lieu of state income tax. Those considering buying a big-ticket item such as a new car might consider doing so before year end as those big ticket items can be added to the state sales tax tables found in the 2011 IRS 1040 Schedule A instruction booklet or use the Sales Tax Deduction Calculator online at IRS.gov.

• Save Receipts and Paperwork: Accurate recordkeeping is a must and also provides a good reminder.