Paying into Taxes or into your Retirement? Ah, that is an easy one….but many people don’t do it

Can you tell it is tax season, my brain is in tax mode since I just went through this annual exercise.  It really makes my brain start to work.  This tip can’t help you for 2011 taxes but moving forward keep it in mind and ask the questions of your tax person since everybody’s situation is a little different.  If you are paying taxes, there is an interesting philosophy that not many really use to their advantage, especially if they are on the cusp of a higher tax bracket.  I was speaking with someone the other day and they said their tax liability was going to be like 30K.   I mentioned the IRA contributions deducted from your taxable income.  She said that they couldn’t afford to put money in IRA because they owed taxes.  I responded with, what if you put the max IRA contribution in December, would that bring down your taxable income enough to lighten your tax burden come April?   She didn’t know, but was going to go call her tax person to find out what impact an IRA contribution would make to her tax burden.   Again, every persons situation is different but it makes sense, if paying into my retirement makes me owe less taxes I should definitely find out what will maximize the benefit for me.

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~ by debt2dreams on February 28, 2012.

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