To Increase Your Refund, Do This One Thing Before Filing Taxes

Here aren’t plenty of options available to you at this point of the year to reduce your taxes. Although it’s already 2024, one significant method to reduce taxes in 2023 is to utilize the standard IRA deduction. So let’s examine what you require in more detail.

IRA: What is it?

There are two types of individual retirement accounts, or IRAs: standard and Roth. Although there’s a few distinctions, the primary one is the tax treatment, and both can be great strategies to preserve for retirement. Though contributions to a traditional IRA are tax-free in the year they are contributed, any withdrawals from the account after retirement are considered taxable income. In contrast, donations to a Roth IRA are not deductible, but eligible distributions are fully tax deductible.

Put simply, individuals who would rather have tax-free income in retirement and have comparatively little current tax obligations should consider a Roth IRA. Traditional IRAs, on the other hand, are typically a better option for those who wish to keep funds on their taxes now.

The conventional deduction from an IRA

Americans may contribute a maximum of $6,500 to their IRA in 2023, or $7,500 if the account holder is 50 years of age or older. It is important to note, however, that contributions for 2023 can be made up till the April 15th tax deadline. Therefore, you have plenty of time to invite them.

Contributions to a traditional IRA may be written off on your tax return if you apply. You are certainly eligible if your employer does not offer a retirement plan.

Your eligibility for any retirement plan offered by your employer, if you or your spouse has one, is based on your earnings. Therefore, before you contribute, make sure you are eligible.

It is simple to open an IRA when you do not currently have one. Learn which of our finest IRA brokers could be the right choice for you by looking at a few of them. Alternatively, if you truly want to keep investing for retirement as easy as possible, think about using a robo-advisor, that will pick an appropriate investment plan for you instantly.