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What You Need to Know About the IRA Tax Deduction

There are few better ways to decrease your tax bill, and thereby increase you tax refund, than taking advantage of the IRA tax deduction. Assuming you qualify for it, making a contribution to a traditional IRA allows you to reduce your taxable income by as much as $5,500 -- $11,000 if you're married filing jointly.

How big of an impact does this have on your tax liability? Consider this: If you and your spouse earned a combined $90,000 in taxable income last year and didn't contribute to a retirement plan at work, then you could decrease your tax bill by $2,750 simply by transferring $11,000 from your savings account into an IRA account.

Think about that for a second. It's basically the same thing as investing $8,250 into the stock market and getting an immediate 33% return. Take it from someone who writes about investing for a living, that's unheard of -- and particularly when you consider that it carries no risk.

With this in mind, I created the following short presentation, which covers the most important things you need to know about the IRA tax deduction.

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John Maxfield
JohnMaxfield37

John has been writing for The Motley Fool since 2011. As a senior banking analyst, he covers the financial industry and the nation's largest banks in particular. He has a bachelor's degree in economics from Lewis and Clark College and a juris doctorate from Southern Methodist University. He's a licensed attorney in the state of Oregon, and resides in Portland with his wife and twin sons. View John Maxfield's profile on LinkedIn

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