Contributing to your retirement account is one of the best ways to reduce your taxable income and increase your tax refund. While some retirement accounts have year-end deadlines for contributions and required distributions, others give you extra time to make deposits that will count toward tax year 2019. Check out these end of year moves that will qualify you for tax savings!
Make 401(k) contributions. There may be no better investment than tax-deferred retirement accounts. They can grow to a substantial sum because the interest compounds over time, free of taxes. If you’re able, max out your 401(k) contribution before year-end ($19,000 maximum allowed for 2019, $25,000 if you are age 50 or over = the $19,000 regular limit for the tax year plus the $6,000 catch-up limit for 2019), so that you can lower your taxable income and make the most of your retirement.
Use the time for IRA contributions. In addition to your 401(k), consider contributing to an Individual Retirement Account (IRA), as well. You have until July 15, 2020, to make IRA contributions for 2019 and make an impact on your 2019 taxes, but the sooner you get your money into the account, the sooner it has the potential to start to grow.
Making tax-deductible contributions also reduces your taxable income for the 2019 tax year. You can contribute a maximum of $6,000 to an IRA for 2019, plus an extra $1,000 if you are 50 or older. If you are self-employed, you can contribute to a Simplified Employee Pension (SEP) IRA as much as the lesser of 25% of your net earnings or up to $56,000 for 2019 and your contributions may be tax-deductible as a business expense.
Qualify for the Saver’s Credit. There’s another plus to contributing to your retirement. You may automatically be eligible for the Saver’s Credit worth up to $1,000 ($2,000 married filing jointly) just for contributing to your retirement account. The Savers Credit can be claimed for your contributions to a 401k, 403(b), 457 plan, a Simple IRA or a SEP IRA. Your contributions to a traditional IRA or a Roth IRA are also eligible for the Savers Credit.
Don’t worry about knowing these tax rules. TurboTax asks you simple questions about you and gives you the tax deductions and credits you’re eligible for based on your answers. If you have questions, you can connect live via one-way video to a TurboTax Live CPA or Enrolled Agent with an average 15 years experience to get your tax questions answered. TurboTax Live CPAs and Enrolled Agents are available in English and Spanish and can also review, sign, and file your tax return.
If you are Self Employed, you can use QuickBooks Self-Employed to easily track your income, expenses, mileage, capture your receipts and estimate your quarterly taxes year-round. Your information can then be easily exported to TurboTax Self-Employed at tax-time.