Last-Minute IRA Contributions Can Be A Hectic Process But Worth The Effort

With the tax season coming to an end, many people are scrambling to file their taxes and save some last-minute money. If you’re looking to reduce your overall tax bill, contributing money to your IRA can be a great way to do so. While it may be a hectic process, it can be worth the effort.

According to certified financial planner Charlie Capasso, contributing to your IRA is “one of the last ways to lower your tax bill.” By taking advantage of this tax break, you can potentially save up to $1,000 on your taxes.

Why Should You Contribute To Your IRA?

Anyone with a family, kids, or just wants to put an extra $1,000 back in their pocket should consider contributing to their IRA. An IRA (Individual Retirement Account) is a personal savings account that provides benefits when you retire, protecting and building your nest egg over time. In other words, you’re investing in your future.

Additionally, IRA contributions can offer tax benefits. While contributions are made with after-tax dollars, you can receive a tax deduction when filing your tax return. This can help reduce your taxable income and result in a lower overall tax bill.

How To Make IRA Contributions

Making IRA contributions is easy, as there are many different options available. You can open an IRA account through a bank, brokerage, or investment firm. Once you’ve opened an account, you can contribute to it regularly, or make a lump sum contribution before the tax filing deadline.

If you’re self-employed or own a small business, you may also be eligible for a SEP-IRA. This is a simplified employee pension plan that allows business owners to set aside a portion of their income in a retirement account. SEP-IRAs have higher contribution limits than traditional IRAs, making them an attractive option for those who want to save more.

It’s important to note that there are limits to how much you can contribute to your IRA each year. For 2021, the maximum contribution is $6,000 if you’re under the age of 50, and $7,000 if you’re 50 or older. However, these limits can change each year, so it’s important to keep up-to-date with the latest information.

The Bottom Line

If you’re looking to reduce your overall tax bill and invest in your future, contributing to your IRA can be a great option. While the process can be hectic, it’s worth the effort to potentially save up to $1,000 on your taxes. Additionally, IRA contributions can provide long-term benefits, helping you secure a comfortable retirement.

So, before you file your taxes, consider contributing to your IRA. It can be an excellent way to make the most of your money and ensure a secure financial future.