Tax day is upon us and if you haven’t filed your tax return there are a few things you can do to potentially decrease what you owe to Uncle Sam.
Make an IRA Contribution. Contributions to a traditional IRA may be tax deductible.
“There are two factors that determine whether an IRA is tax deductible or not,” says Kyle Ryan, Executive Vice President of Personal Capital Advisors. “One is your Adjusted Gross Income and the second is whether your employer provides a retirement plan, like a 401k.”
If your employer, or your spouse’s employer, does not provide a retirement plan, your entire contribution – up to $5,000 if you’re under age 50 – is tax deductible. If your spouse does have a retirement plan, there is a cap of $183,000 in total income where you won’t be able to make a deduction.
“If you’re single, and your income is $68,000 or less, you are still eligible to take a deduction,” says Ryan.
The IRA contribution limit does not apply to rollover contributions or qualified reservist payments. Roth IRA contributions are not deductible.
Contribute to your HSA. Another great tax-savings resource is the health savings account or HSA if you have a high deductible health plan. Traditionally, HSAs are paired with high-deductible health plans and allows you to save pre-tax dollars for future medical expenses. The 2012 individual contribution limit for an HSA is $3,100 and $6,250 for families. A $1,000 catch-up contribution is available to those age 55 and older.
“This money can be saved tax free and there are no penalties on withdrawals if used for medical-related expenses,” says Ryan. “These savings can really add up over time.”
Getting Advice? Take a Deduction. The IRS will also let you deduct certain expenses incurred on your taxable investments over and above 2% of your adjusted gross income (AGI).
“This includes fees for investment counsel and advice, including subscriptions to financial publications,” says Ryan. “Deductions also apply to IRA custodial fees if you pay these fees in cash outside the account.”
Software or online services used to manage your investments can also be tax deductible.
You can’t deduct trading commissions, the costs associated with travel to a shareholder’s meeting or investment advisory fees related to tax-exempt income.
Watch the entire interview with Personal Capital’s Kyle Ryan on FOXBusiness.