Don’t miss your opportunity to minimize your tax burden before the April 18th deadline. Your tax savings could potentially add up to thousands of dollars.
What can you do to reduce your taxable income today?
- Start or max-out a traditional IRA
- Maximize Roth IRA contributions
- Contribute to your SEP or Solo 401(k) (if self-employed)
- Boost your 401(k) retirement savings
TRADITIONAL IRA - Making a contribution to a retirement account is one of the best ways to reduce your tax burden. Contributions (except the Roth IRA) are pre-tax, so they won’t be subject to federal income taxes until you start taking distributions from the plan. These funds grow free from taxes until retirement.
If you are in the 35% tax bracket and make the maximum contribution of $5,500 ($6,500 if you’re 50 or older by the end of the year), you can save as much as $1,925 in taxes. You can contribute to an IRA all the way until the tax filing deadline – April 18th, 2017.
ROTH IRA - If you qualify for a Roth IRA, it may be more beneficial than a tax-deductible IRA. You can take advantage of the compounding effects of your investment returns, and the money you withdraw at retirement will be tax-free. That can save you a tremendous amount in taxes in your later years. NOTE: To qualify for the tax-free, penalty-free withdrawal of earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59 ½, or due to a qualified distribution.
SEP IRA - If you’re self-employed, you can contribute up to 25% of your income ($53,000 maximum) to a Simplified Employee Pension (SEP). If you’re filing for an extension, you can lower your taxable income dollar for dollar until October 16th, 2017.
SOLO 401(k) - Are you a business owner with no employees? You can elect to defer funds to a Solo 401(k) at 25% of your income, up to $53,000 – including business contributions.
Saving income taxes is a great benefit, but imagine what saving each year could do for your retirement readiness. Here’s a breakdown:
*The above scenarios are hypothetical and do not account for market volatility. Future rates of return cannot be predicted with certainty.
As you can see, there are still a lot of options for reducing your taxable income for this year’s return. Call us today and we can help you weigh your options and then implement a tax strategy that aligns with your long-term financial goals.
Note: These tax strategies are offered as suggestions only, and should not be substituted for the direction of a professional tax advisor.