With the federal income tax filing deadline just less than two weeks away, finding tax breaks are critical in order to save money (and to avoid paying a bill to Uncle Sam). A number of our posts have focused on exemptions, but this time we will highlight the benefits of saving for retirement and how it can help you during tax time.
Even though it is April 2016, you still have time to contribute to retirement plans that will count against your 2015 income. This is largely because many employees (and executives) receive bonus compensation in March and April based on last year’s results. As such, federal law allows such contributions to be recorded so close to the filing deadline.
If you’re wondering whether you should contribute to a Roth IRA or a traditional IRA, don’t despair over whether tax benefits apply, as both have their advantages. With a Roth IRA, you won’t enjoy immediate tax savings, but you won’t have taxes to pay once you take out the money.
Generally, if you are under the age of 50, you may contribute up to $5,500 to your Roth IRA. If you are older than 50, this amount goes up to $6,500. However, you must be mindful of the various limits for IRA contributions. Jointly filing married couples who make more than $193,000 may not receive credit for contributing. The same applies to single filers making more than $131,000.
If you have questions about your contributions and how it may affect your return, an experienced tax attorney can help.