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DEL.ICIO.USYour Tough Times Money Guide was the previous entry.
STRAIGHT TALK ON TAXES
Best Year-End Move for Salaried Taxpayers
Nov 18, 2008
The best way for most salaried taxpayers -- who have little control over their annual income -- to reduce their tax bill is to maximize their contributions to tax-deferred retirement plans before the end of the year. For 2008, you can contribute up to $15,500 to your 401(k) or similar workplace-based retirement plan, such as a 403(b) plan, used by charities, school systems and other nonprofit organizations, or a 457 plan, used by state and local governments. If you are 50 or older, you can contribute an additional $5,000 in catch-up contributions to these plans, for a total of $20,500.
You still have time to boost your salary deferral in your last paycheck or two this year or to earmark some of your year-end bonus for your retirement account. Although the current market volatility may spook some investors, by continuing to fund your retirement accounts in a down market, you will be scooping up shares at bargain prices.
If you aren't covered by a retirement plan at work, you can contribute up to $5,000 to a tax-deductible IRA, plus an additional $1,000 if you are 50 or older. (You can contribute up to the same limits for a nonworking spouse.) With an IRA, you don't have to rush to beat the ball drop in Times Square. You can set up and contribute to an IRA anytime before filing your 2008 tax return next spring.
If you're self-employed, consider opening a solo 401(k) or a SEP IRA. Depending on your income, you can contribute up to $46,000 to either plan this year -- and $5,000 more in catch-up contributions to a solo 401(k) if you are 50 or older. You must establish your solo 401(k) by the end of the year, but you can make your tax-deductible contributions up to the time you file your 2008 taxes, including extensions. You have until next April to set up and fund a SEP IRA. -- Mary Beth Franklin, senior editor
Sign up to receive Mary Beth Franklin's daily year-end tax tips. Her seasonal column launches November, 24 -- don't miss one money-saving move.
If you aren't covered by a retirement plan at work, you can contribute up to $5,000 to a tax-deductible IRA, plus an additional $1,000 if you are 50 or older. (You can contribute up to the same limits for a nonworking spouse.) With an IRA, you don't have to rush to beat the ball drop in Times Square. You can set up and contribute to an IRA anytime before filing your 2008 tax return next spring.
If you're self-employed, consider opening a solo 401(k) or a SEP IRA. Depending on your income, you can contribute up to $46,000 to either plan this year -- and $5,000 more in catch-up contributions to a solo 401(k) if you are 50 or older. You must establish your solo 401(k) by the end of the year, but you can make your tax-deductible contributions up to the time you file your 2008 taxes, including extensions. You have until next April to set up and fund a SEP IRA. -- Mary Beth Franklin, senior editor
Sign up to receive Mary Beth Franklin's daily year-end tax tips. Her seasonal column launches November, 24 -- don't miss one money-saving move.
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