A Few Retirement Tax Tricks You Might Not Know About


The IRS might not be anyone’s best friend, but that doesn’t mean that they don’t have your best interests at heart. Okay, so they might not, but they do offer some tax breaks for certain things and that is something we appreciate very much. With that in mind, we have thought about the many different ways we can look into saving you a bit of money with which to retire simply by utilizing tax breaks that are offered to taxpayers by the federal government. Chances are good that some people already take advantage of all of these, but in case you don’t we have them here for you. Save money, retire on time and in a good position; and let the IRS help you do just that.

Many Americans assume that they are doing enough or that there is nothing left for them to do as far as their retirement savings and taxes are concerned. However, there is always a way to earn more, save more and do more. We outline a few of the little known ways you can contribute more toward your retirement using money that you saved with some pretty amazing tax breaks. It takes the confusion right out of tax time and makes your savings account a little healthier as a whole from this point forward.

See if you qualify for the saver’s credit

This is something that many people forget to look into. Since it is not something everyone qualifies for, it’s easily overlooked. Essentially, it’s a tax credit that comes directly to you based on your income and your retirement savings account. If you make less than $60,000 per year and you contribute to a retirement account, you will qualify for this per taxpayer in your household with a retirement account. It’s something that makes your retirement savings more affordable, and it provides you with a bit more money in your pocket to use toward your retirement.

Do the math

One of the most important and imperative things taxpayers forget to do is the math. It’s simple; basic math can help you save a lot of money. For example, many people focus on what they see and nothing else. That means that you are focusing more on what you think is important and beneficial and not on what is actually important and beneficial. When you look at contribution limitations, you might not understand how those work to save you money for retirement. But when you do the math to see what a contribution actually costs you and saves you over the course of the year the life of your account, you might begin to see the bigger picture. For example, a certain contribution might save you more money with tax breaks than others, so even though the contribution limit is lower on that particular account, it’s actually more financially responsible than maxing out another account that costs more as far as taxes are concerned.

This kind of ‘basic’ math can be a bit intimidating, but do not let it fool you. The internet is a valuable tool, your accountant and your financial advisors are also all valuable tools as far as your questions are concerned.

Look for missed credits and deductions

What many people fail to consider is that there are always credits and deductions that most taxpayers can take but sometimes miss. This tends to happen most when life changes occur. For example, a mother who is now single can file as head of household, but might not realize that she qualifies for that and can take a bigger standard deduction. Additionally, sometimes people don’t realize that there are credits for things like education and even child care tax credits. What this means is that if you decide to go back to school, you can write off the cost of your tuition and books. If your kids begin going to daycare, you can write off a portion of what you pay to send them to school every day.

These missed deductions and credits have absolutely nothing to do directly with your retirement. However, you can take the money you saved from these items and allocate them to your retirement. It’s free money that’s all yours, and you can save it for the day when you begin living your golden years in enjoyment and freedom – and hopefully financial freedom.

Leave the money alone

Here’s something else that people tend to forget; your retirement fund is not a free savings account that allows you to take from it when necessary. You can save money using your taxes by not removing any of the money already in your account. Most retirement accounts charge you a hefty fee for pulling money out early, even if you are on a repayment plan to put that money back into the account as quickly as possible. It’s not always possible to use this account before the time and not be penalized.

Set up a charitable trust

Many people are completely unaware of this tax savings trick that will help them in their retirement years. The biggest misconception is that a charitable trust is something only the world’s wealthiest people can afford, and this is not the truth. If you plan on leaving anything to your favorite charity, pay the fee to set up a trust. It’s typically less than $2000 to do this, and then you get immediate tax breaks.

Okay, I realize that it sounds pretty expensive to ask you to set up a charitable trust for $2k worth of legal fees and then the money you have to allocate toward the trust, but it’s going to save you big time. See, you do this and you get a significant tax break. That tax break is going to save you tens of thousands of dollars at tax time for the rest of your life. This means your $2k investment just turned into an investment worth tens of thousands that you can apply to your retirement account.

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