Take Advantage of This Last-Minute Tax Deduction
No one likes writing that big check to Uncle Sam each spring. That’s why most of us look for every tax deduction and credit available to us, and do our best to max out on them. Luckily, there is one tax break that can save you money on your tax bill, and it’s okay if you didn’t take advantage of it in 2015. You can still earn this deduction up until the tax filing deadline on April 18.
What we’re talking about is Individual Retirement Account (IRA) contributions. Each year, you can deduct your IRA contributions, up to a certain amount. For 2015, the IRA contribution limit was $5,500 for singles, or $11,000 for couples. If you’re over age 50, you can make an additional catch-up contribution of $1,000 per person on the account.
If you log into your IRA account to make a contribution online, just remember to select the correct contribution year. If you want to use the payment as a tax deduction for 2015, then make sure you select “2015” as the contribution year.
An IRA is a terrific way to save for retirement, because you can set aside pre-tax dollars now. Of course, you will owe taxes on distributions from the account once you reach retirement. If your employer doesn’t sponsor a 401(k) plan, or if you’ve already maxed out your 401(k) contributions and want to save additional money for retirement, an IRA is a good option.
You can open an IRA with your bank or a brokerage firm, and you will be presented with many different investment options. Many low-fee options are available, and you can often open an IRA with as little as 500 dollars.
Even if you can only make small contributions to your IRA, keep in mind the power of compounding interest over time. It’s better to start early and save even a small amount each year, because your money has decades in which to grow. When you factor in the potential tax savings, it’s easy to see how an IRA can help you become better prepared for the future.
For more information on Independent Retirement Accounts, give us a call. We can assess your financial planning goals and help you decide if an IRA is a good fit for you. And remember – April 18 is the deadline for making IRA contributions that you want to count for the 2015 tax year.