If one of your resolutions this year is to do a better job of planning for your retirement, part of that job includes planning for the tax bite you will incur once you retire. A recent USA TODAY article explains how you can help reduce your taxes while saving for retirement:
Use your 401(k). Contributing to a 401(k) from each paycheck provides you with a temporary tax windfall, since your 401(k) is funded with pre-tax earnings and what is allocated as a 401(k) contribution is not counted toward your taxable income at the end of the year. In 2014, you can contribute up to $17,500 to your 401(k) if you are under 50; those over 50 can contribute up to $23,000.
Get an IRA. If you don’t have a 401(k), open an IRA to reduce your taxable income and provide you with an IRA contribution deduction. In 2014, you can contribute up to $5,500 to an IRA if you are under 50; those over 50 can contribute up to $6,500.
Saver’s credit. To incentivize retirement saving for lower income people, the IRS provides additional tax credits for making contributions to an eligible retirement savings plan. Taxpayers earn a tax credit worth a percentage of the contribution – the lower the income, the higher the percentage. The income limit to qualify for the saver’s tax credit is $60,000 for households, $45,000 for heads of households, and $30,000 for individuals.
The Flanigan Law Group provides Southern California residents with personal attention for estate planning, administration and litigation legal services. When disputes between families, arise, they are very successful in resolving legal estate issues quickly and efficiently while preserving financial and emotional resources. Contact the Flanigan Law Group at 949-450-0041.