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With the clock ticking on 2016 and the ability to lower your tax bill coming to a close, I thought it would be helpful to bring to your attention two retirement and four medical year-end tax-reduction strategies. With the help of one or more of these strategies, you might save several thousand dollars.
The six strategies I will touch upon are as follows:
Stashing away funds for retirement not only provides security for your future, but also decreases your current taxes. Make sure your retirement plan is in place by the end of the year so you can get a tax deduction for 2016.
Several retirement plans comprise contributions from both the employee and the employer. And remember, in most cases you are considered both employee and employer. So check the deadlines for when each contribution must be made for your specific retirement plan. While elections for employee contributions are usually due by year-end, you can take your time with the employer contributions as long as they are in before the tax return is filed.
Consider converting your 401(k) or traditional IRA to a Roth IRA. If you make good money on your IRA investments and you won’t need the retirement funds during the next five years, the Roth is far superior to the traditional retirement plan. Feel free to contact me to discuss all the advantages the Roth has over a traditional IRA.
But before you convert to a Roth, you should know how much your tax bill will be upon conversion, to ensure you have the money on hand. Just make sure not to use your existing 401(k) or traditional IRA for the cash to pay the taxes, because that is likely to trigger both income and penalty taxes.
Please contact me to discuss in greater depth any of the strategies outlined above.
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Keana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion. Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients.