Saving money when it comes to tax time is all about being smart with what you do with your money. Reducing your taxable income will most likely save you some cash. One of the best ways to do this is by putting money into a traditional individual retirement fund, or an IRA.
There are a few restrictions when it comes to your IRA and taxes though.
First, you can only claim a maximum of $5,000 if you are under 50 years old. If you are between 50 or 70 and a half years old you can claim $6,000.
You must also have earned income for the year that is greater than what you put into the IRA. You can’t put more money in than you earned basically.
You have until tax day each year to contribute money into the IRA, though it would probably be less stressful to do a little at a time, rather than one lump sum.
Now, that being said, there may be situations where you can’t deduct your IRA, or may only be able to deduct part of it. Below are the different income ranges for 2011. If you come in below you may deduct all of it, if you are within the range you may deduct part of it and if you are above it then none of it is deductible.
Single filer: $56,000 to $66,000
Head of household filer: $56,000 to $66,000
Joint filer: $90,000 to $110,000
Married but filing separately: $0 to $10,000
As always we suggest you seek out a tax professional if you are unsure or have more questions.