In my previous post I focused on retirement plans businesses can setup before year-end to capture tax savings. In this post I will focus on personal retirement plans and smart moves that can be made before year end to capture additional tax savings.
As you all may know IRA accounts are the primary vehicle for personal retirement.
Here are two things you should keep in mind coming into year end.
First, even if you currently contribute to a retirement plan such as a 401(k) plan, you could still potentially participate in either a traditional IRA, a Roth IRA or both. Certain income limitations apply to deductible contributions.
Second, if you plan on making contributions to an IRA account in 2010, you have until April 15th of 2011 to make tax deductible contributions to your IRA account. This may be a smart tax move since the maximum individual contribution is $5,000 with an additional $1,000 catch up available to individuals 50 years and older. Just as an example, if you are in the 25% tax bracket and are 52, you could potentially make a $6,000 contribution to a Traditional IRA. In this circumstance, if you maximized your contribution, you would also reduce your tax bill by $1,500, a very smart tax move indeed.
I also mention this because the IRS now allows for income tax refunds to be direct deposited into IRA accounts, a major benefit for taxpayers whom might not save that money otherwise.
Please note that certain taxpayers are not eligible to make deductible contributions to IRAs, please check with your tax professional before you make your decision.