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PSA: You Have Until April to Lower Your Tax Bill With IRA Contributionspersonal finance

PSA: You Have Until April to Lower Your Tax Bill With IRA Contributions

Kristin Wong , Gawker Media
Photo by JESHOOTS

 If you have a traditional Individual Retirement Account (IRA), you can deduct the money you save in that account from your taxable income. And tax procrastinators, there's still time to do it for last year's taxes.

There are two basic types of IRAs: Roth and Traditional. We've detailed the differences here . Basically, with a Roth IRA you pay taxes on your savings now, and with a traditional, you pay taxes when you withdraw your money at tax time. In other words, traditional IRAs are tax-deferred. So if you save money in your traditional IRA now, you can deduct it from your taxable income, which means you pay less in taxes.

And the IRS gives you until Tax Day to make deductible contributions to an IRA. This year, that day is April 18, 2017 . Of course, this assumes you haven't already reached your contribution limits for 2016 . In general, the limits for 2015, 2016, and 2017 cannot be more than:

  • $5,500 ($6,500 if you're age 50 or older), or
  • your taxable compensation for the year, if your compensation was less than this dollar limit.

Of course, this isn't advice that everyone can afford, but if you have a traditional IRA and you have the money to sock away a little more, it's one way to reduce your 2016 tax bill.

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