How can you benefit yourself now and in the future at the same time? It’s simple, save money in a tax-deferred retirement account like a traditional IRA. A traditional IRA is a personal savings plan that allows a taxpayer to accumulate money tax free. For 2017, you can qualify for up to $5,500 in tax-deferred contributions made. If you’re 50 or older it is an extra $1,000.
To provide a clear picture, let’s say you contribute $5,500 to a traditional IRA. If you’re in the 25% tax bracket, this allows $1,375 in tax savings! Not only do you receive a tax savings, you also accumulate for retirement days.
Along with a tax deduction for traditional IRA contributions, there is a “Saver’s Credit” available to lower income individuals. You can receive a maximum credit of up to $2,000. Credits are much more beneficial than a deduction for the fact they reduce your tax liability dollar for dollar. Why not get both?