The article below is up to date based on the latest tax laws. It is accurate for your 2018 taxes, which you will file by the April 2019 deadline. Learn more about tax reform here.
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 2018. 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 ($18,500 maximum allowed for 2018, $24,500 if you are age 50 or over) 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 April 15, 2019, to make IRA contributions for 2018 and make an impact on your 2018 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 2018 tax year. You can contribute a maximum of $5,500 to an IRA for 2018, 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 $55,000 for 2018 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 all of these retirement tax tips. TurboTax will ask you simple questions and give you the tax deductions and credits you are eligible for based on your answers. If you have questions while doing your taxes you can connect to live via one-way video to a TurboTax Live CPA or Enrolled Agent to get your tax questions answered.
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