Not only can medical and health-related expense spell out savings on your tax return (see “Part I”), so can retirement and long-term savings planning. You may be able to deduct, claim tax credits, or shield pre-tax income through contributions to retirement and long-term savings plans on your taxes regardless if you are traditionally-employed, self-employed, or a business owner.

Here are some of the retirement options you can access to in order to maximize tax savings:

• Deductions for IRAs: As most people know, if you participate in a traditional IRA, be sure to contribute the maximum allowable each year--$4000 if you’re single--because you can make a deduction from your taxes up to the maximum per year (for more information about other long-term savings options, see “Types of Savings Part III: More Long-Term Savings Options”)

• 401k/403k Plans: If you are making contributions to a 401k/403k plan, you are not only reaping the rewards of contributions matched by your employer, you are also making contributions that won’t be taxed, and need not be claimed as part of your income.

If you are self employed, you can setup a solo 401k to make pre-tax contributions and lower your taxable income.

• SEP Plans: If you are self-employed, you can stash earnings away in a Simplified-Employee Pension Plan, thereby lowering your taxable income while saving for your future. For more retirement, pension, and long-term savings plans for the self-employed that can lower your tax liability, see “Types of Savings Part IV: Employment Savings Plans”.

• Company Retirement Plans: If you are a business owner and have set up pension or retirement plans for your employees as well as yourself, make contributions now. You will reduce the taxable income of your business by helping you and your employees save for the days when work is done.

Keep in mind there are specific deadlines to set up company retirement plans. For instance, Savings Incentive Match Plans for Employees of Small Employers (SIMPLE) must be established by September 30 for you to claim eligible tax savings for the corresponding tax year.

Retirement Savings Contributions Credit

Most people who think about their future beyond their working years are probably contributing the highest amount they can afford to retirement and tax-deferring savings plans. But an added benefit is the Retirement Savings Contributions Credit, in which you receive a tax credit for simply putting money away.

The credit is available only to those with lower adjusted gross incomes--$25,000 if you’re single, $50,000 if you’re married filing jointly--but with other credits and deductions, you may still qualify.

You should always consult a tax professional for more details about the tax deductions and tax savings strategies you can take advantage of personally or in business. After all, professional services are also tax deductible; see “Equipment, Expenses, and Professionals for Hire: More Small Business Tax Savings” for more tax-reducing deductions that may also work if you are an employee.

References

Dianne Molving. Credits and Deductions Save You Tax Dollars

Untitled. Roy Lewis

www.nfib.com. Tax-Saving Moves That Will Pay Off Next filling Season