Tax day is almost here, and we know you are scrambling looking for any potential last minute deductions, credits and anything else that might allow you to save a bit of money on your taxes. I know I was before I paid mine; and that means that the rest of the world is doing the same. Since income taxes do not come cheap, we thought we might help you figure out where you stand as far as last minute savings are concerned. Unfortunately, you’re mostly tapped out as you should have done all you could to save money on your income taxes back before you put on your party hat and rang in the New Year, but there is one thing you can still do; contribute to your IRA.
Know the Limits
There are different IRA limits for every taxpayer, and now is the time to learn them. If you are younger than 50, you can contribute as much as $5,500. You can contribute an additional thousand dollars if you are over 50. If you are a married couple filing your income taxes together, you can contribute double.
Know the Deadline
Since this money is considered a tax break, you want to contribute it. You can deduct that amount of money from your overall adjusted gross income and bring down your income to make it fall into a lower tax bracket at best, and to lower your tax liability at worst. You have to make this contribution no later than income tax day, however. This year, you have until April 18 since there are some federal holidays in there and tax day is a bit later as a result.
Know the Difference
Here’s where things get tricky; if you’re looking to save now, make sure you are contributing to a traditional IRA. You will not be taxed on this money now, saving you this year. If you contribute to a Roth, it is taxed now and not when you retire. You make the decision; it’s up to you. Just know that with one, savings happens now and with the other it happens much later.
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