We all work hard for our money, and when tax season rolls around, it’s hard to comprehend the idea that we might have to fork some of it over to the government. One of the ways to reduce your taxable income is to open and contribute to an IRA.
IRA Contributions
An IRA, or individual retirement account, is a retirement savings account. There are several different types including SIMPLE IRA, SEP IRA, Roth IRA, and traditional IRA. Roth IRA contributions are not deductible. Traditional IRAs can protect your income during tax season, but you need to be mindful of the deduction and contribution limits to qualify. To learn more about IRA deductions and contributions, visit the IRS’ website.
It’s important to remember that opening or contributing to an IRA isn’t a “business expense.” It is a personal expense that goes on your personal tax return, and the resulting decrease in income offsets the individual’s total personal profits for the year. It’s not as if you put $5,000 in your IRA and get a straight discount of $5,000 off your taxes. However, it can have a significant impact if you are facing a tax bill this year. And, given the choice, wouldn’t you rather put your money into your retirement than just give it to the government?
The deadline for opening and/or contributing to an IRA for the this tax year is April 15 (sound familiar?) But don’t wait until the last minute! Call your financial planner today and find out how to take advantage of this valuable tool for tax reduction. If you need a referral, call Ten Key and we’d be happy to oblige!
Conclusion
In conclusion, contributing to your IRA can help mitigate your tax burden. For the most benefit, be sure to choose the right type of IRA and be mindful of contribution limits.