PSA: You Have Until April to Lower Your Tax Bill With IRA Contributions
If you have a traditional Individual Retirement Account (IRA), you can deduct the
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.
- $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.