April 15 can feel especially “taxing” if you're trying to set money aside for retirement. But there are actually some great tax breaks set up specifically for those who are saving for the years ahead.
401(k)
This is fairly common knowledge, but it’s always worth pointing out. You can defer income tax on up to $18,000 in 2015 by contributing that money to a traditional 401(k), 403(b) or the federal government’s Thrift Savings Plan. You will eventually pay taxes on that money, but not until you’re ready to start taking withdrawals.
IRA
You can also defer income tax on up to $5,500 by contributing to a traditional IRA. You can make contributions to your IRA just before filing taxes to reduce your tax bill, or, better yet, increase your refund.
Catch-Up Contributions
If you’re over 50, consider taking advantage of the extra $6,000 you can contribute to your 401(k) in addition to the $18,00, and the extra $1,000 you can add to your IRA in addition to the $5,500 for a bigger tax break this year.
In general, if you start withdrawing from retirement accounts before age 59 ½, you’ll be subject to a 10 percent early-withdrawal tax. If, however, you use that money for things like buying a home, paying for medical bills or tuition for higher education, you can avoid paying that extra 10 percent.
Hopefully this general list helps you maximize your retirement savings this year and dread April 15 a little less. Each finacnial situation is unique though, so we always recommend talking to your tax professional about all the tax breaks available to you.