Tax Saving Tip You Cannot Ignore ...

So you are not alone! Tax time can be stressful for everyone. One good news this year is that if you like to wait till the last minute to do your taxes, you actually have 3 extra days. Yes, the tax filing deadline this year is April 18’th 2016 thanks to Washington D.C. Emancipation day holiday which falls on the April 15’Th this year.

While Uncle Sam can come across as a really scary guy at first, there are several things we can still do to make sure we are not giving away too much of our hard earned money. Your options for tax saving are limited once the year turns over but below is one thing you can still do to ensure a lower tax bill. 

Contribute to your Traditional IRA account

Not everyone will qualify for this contribution to be deductible but it is well worth checking into. There is a lot of confusion regarding who can contribute to their IRA account and when. Below are a few quick tables explaining the eligibility requirements for this year.

If you (and your spouse if married) are covered by a retirement plan at work

If you (and your spouse if married) are not covered by a retirement plan at work

If you are married and only one spouse is covered by a retirement plan at work

Key points to remember about Traditional IRA Contributions

1. A non-working spouse can make a IRA contribution in his/her name as long as they meet the eligibility requirements described above
   
2. IRA contributions can be made up till the tax filing deadline date (April 18’th 2016)
3. You can file a tax return with the IRS claiming the IRA deduction before you actually make the contribution into the account ( just make sure you make it before April 18’th 2016)
4. Contributions made to IRA accounts grow tax free
5. Funds once deposited into an IRA cannot be withdrawn before age 65 without a penalty of 10% + income tax
6. Deductible contributions reduce your taxable income thus having a positive effect on your total tax due ( or refund due)
   

Bottom Line

Consider the idea of making a deductible contribution to your IRA instead of paying more in taxes to the IRS. Remember you don’t have to make the contribution at the time of filling your tax return just as long as you make it before April 18’th 2016. For people who are fortunate enough to get a refund, it would be a smart choice to use your refund amount towards your IRA contribution. Your retirement year in thank you!

For more information about 2015 income taxes please click the link below
 KEY FINANCIAL DATA FOR 2015 fact sheet
 

Written By:

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Rajiv Dixit
Financial Advisor & Portfolio Manager
Parks Capital

Read more about Parks Capital & Rajiv Dixit by visiting Parks Capital at a Glance

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