So with tax season officially kicking off next week, as the IRS will begin receiving returns on January 23rd, it would seem that the time to save money on your 2016 taxes is now gone. However, there is still a nice tax break available for this year all the way up till April 18th (the tax filing deadline for 2017). You can still use your contributions to a traditional IRA as a deduction on your 2016 tax return.
In fact, you can even contribute as much as $5,000 for both the 2016 and 2017 tax years; and if you’re older than 50 you can also contribute an extra $1,000 for each year as a catch-up contribution. While you can also do the same for a Roth IRA those contributions are not eligible for a tax deduction. Also, keep in mind that this limit applies to all your IRA accounts. You cannot contribute $5,000 to each, but rather $5,000 collectively.
This is a great way for just about anyone to lower their tax bill, including investors that don’t currently have an IRA set up. The savings can be significant. For example, if you contribute the maximum of $5,500 (for taxpayers under 50 years of age who fall in the 25 percent tax bracket) you would save $1,375 on your tax bill for 2016.
The good news doesn’t end there, because, of course, in addition to the nice tax savings you will also be creating a nice retirement fund for those golden years, which is another a great reason to open and contribute to an IRA. If you need help with this tax-saving idea then contact us today.