Around this time of the year, when the tax reports are coming to your mailbox, you might be wishing you could do something about your upcoming tax bill. Well, maybe you can for your 2013 return, and for your 2014 return as well!
Did you or your spouse work in 2013? You may be eligible to make a deductible contribution to an IRA. Contribute $1000 and you can save $150 off your taxes, assuming you’re in the 15% tax bracket. The higher your bracket, the more you save. A married couple can contribute as much as $13,000, and save a couple of thousand on their 2013 return. These contributions for 2013 can be made through tax-filing day (without extensions) in 2014. But remember, your contributions can never be greater than your earnings. Also, you cannot make a regular IRA contribution, or a spousal contribution, in any year you are age 70-1/2 or older, even if you are working. Darn.
As a matter of fact, if you will be over 70-1/2 this year, you have to make a minimum withdrawal from your IRA and 401k. The withdrawal is about 4% of the account’s value as of the end of last year. But the calculation changes every year, and the penalty is huge if you forget or take out too little. If this has happened to you, call us for a work-around.
If you have a Roth-IRA, there is no requirement to take the money out, regardless of age. And if you’re earning income from work, you can still make a contribution. There’s no tax deduction, but the money can grow tax-free as long as you live!
If you have a question that you would like us to answer, please email us at firstname.lastname@example.org or call our office at 860.521.471.