It May Not Be Too Late to Reduce Your 2013 Taxes

You have until 11:59 p.m. on April 15, 2014, to file your 2013 taxes. That's less than a week away. Time is running out, but there are still a handful of things you may be able to do now, in April 2014, to reduce your 2013 taxes. If you qualify, the easiest thing to do would be to fund a deductible traditional IRA for 2013. You have until that April 15 deadline to fund your IRA for 2013, and that deadline holds firm even if you apply for an extension to file your overall tax return.

Do you qualify?
To contribute to a traditional IRA, you must:

  • Not have reached age 70-1/2 (or older) by the end of the year for which you are contributing
  • Have taxable compensation of at least as much as you are contributing. Alternatively, you may also contribute if you're married and filing jointly and your spouse has sufficient taxable compensation to cover the total of both your contributions.

If you're eligible to contribute, the maximum you can invest in your IRA for 2013 is $5,500 -- or $6,500 if you reached age 50 or better in 2013. The rules on whether you can deduct your contribution are a bit more complicated. The two charts from the IRS below can help you make that determination for your 2013 contribution. The first chart shows the deductibility rules for your traditional IRA if you are not covered by a retirement plan at work, and the second shows the deductibility rules if you are covered by a retirement plan at work.

If you are not covered by a retirement plan at work:

Source: Internal Revenue Service.

 If you are covered by a retirement plan at work:

Source: Internal Revenue Service.

Are there other ways to save on your 2013 taxes?

If you happen to be self-employed, you have an even longer window to save on your 2013 taxes. The IRS will let you set up and fund a simplified employee pension, or SEP, as late as the due date of your taxes, including extensions. An SEP will let you contribute and deduct up to 25% of your net earnings from self-employment (excluding the value of the contribution itself), up to a maximum of $51,000 for 2013.

Either way, while the IRS offers you some flexibility in funding your retirement accounts for 2013, to take advantage of the tax savings now, your time is running out. If you want the tax savings for 2013, get moving before it's too late.

Take advantage of this little-known tax "loophole"
Recent tax increases have affected nearly every American taxpayer. But with the right planning, you can take steps to take control of your taxes and potentially even lower your tax bill. In our brand-new special report "The IRS Is Daring You to Make This Investment Now!," you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2908489, ~/Articles/ArticleHandler.aspx, 9/5/2015 10:17:19 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Chuck Saletta

Chuck Saletta has been a regular Fool contributor since 2004. His investing style has been inspired by Benjamin Graham's Value Investing strategy. Chuck also can be found on the "Inside Value" discussion boards as a Home Fool.

Today's Market

updated 13 hours ago Sponsored by:
DOW 16,102.38 -272.38 -1.66%
S&P 500 1,921.22 -29.91 -1.53%
NASD 4,683.92 -49.58 -1.05%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes