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Get a Bigger 2015 Refund by Using These Tax Saving Tools Now

Many taxpayers believe that with the end of the year, their chances of reducing their annual tax bill has ended, too. However, there is one big way through which taxpayers can lower their tax liability after the end of a year: contributing to retirement accounts and claiming a deduction.

The deadline for making contributions to many types of retirement accounts, including traditional IRA’s, extends well beyond Dec 31. Regardless of whether you’re an employee or you’re self-employed, you can claim a deduction on your contribution to further bring down your tax liability. The Motley Fool shares:

“You have until April 18 to contribute to certain types of accounts
“If you have a 401(k) or other retirement plan at work, you generally can’t contribute to it for the 2015 tax year anymore (contact your plan administrator to confirm). However, many people don’t realize that you can contribute to other types of retirement accounts for 2015 all the way until the tax deadline, which is April 18, 2016.

“This includes the following types of accounts:

  • Traditional and Roth IRAs
  • SEP-IRAs
  • Solo 401(k)s

“Roth accounts are great for several reasons, but they unfortunately won’t help your tax refund this year. The latter three account types listed — SEP-IRAs, SIMPLE IRAs, and Solo 401(k)s — are great for self-employed individuals or small business owners. To help you make a smart choice, here’s a good discussion about choosing the best IRA for you — Roth, traditional, or one of the other options.

“For our immediate goal of tax savings, Traditional IRAs are the most common way the average taxpayer can still boost their tax refund after the calendar year has come to an end. For the 2015 tax year, you can contribute up to $5,500 to a traditional IRA, with an additional $1,000 ‘catch-up’ contribution allowed for savers over 50.

“Can you get a deduction?
“Depending on your income, marital status, and whether or not you can participate in a retirement plan at work, you may be able to deduct the money you contribute from your taxes.

  • If you (and your spouse, if applicable) do not have the ability to contribute to a retirement plan at work, you can deduct your traditional IRA contributions no matter how much you earn.
  • If you’re single and can participate in a plan at work, the maximum adjusted gross income for a full deduction is $61,000, and the deduction phases out completely for AGI above $71,000.
  • If you are married, and your spouse can participate in a retirement plan at work, but you can’t, your ability to take a full deduction begins to phase out if your combined AGI is more than $184,000, and it disappears completely for AGI above $194,000.
  • Finally, if you’re married filing jointly and are able to participate in a plan through work, the full deduction AGI limit is $98,000, and the maximum for a partial deduction is $118,000.

“Also, keep in mind that retirement savings get you an above-the-line tax deduction, meaning you can use it whether or not you choose to itemize.”