Here's one sure-fire way to lower your tax bill for 1996.
Slap some money into an individual retirement account (IRA).
If you qualify, you won't pay taxes until you start withdrawing the
money, most likely during retirement. By then, your IRA nest egg will be
bigger and your tax bracket could well be lower.
But hurry. Today is the tax filing deadline, and the deadline to
deduct an IRA investment from 1996 taxable income, even if you receive
an extension for filing your return.
You can even borrow money for an IRA and still take the deduction.
Generally, the maximum contribution for '96 is $2,000 for an
for a couple.
One popular type of IRA, self-directed, offers the most options -
mutual funds, stocks, bonds, and more.
If you miss the deadline, don't despair. There's another IRA goody
available until April 15, 1998.
For 1997, the limits get bigger: up to $2,000 for each spouse.
If neither you nor your spouse contribute to a voluntary retirement
plan at work, each of you may deduct up to $2,000 in IRA contributions
from your 1997 income. (As long as you're under age 70-1/2 and one of
If one of you does have a plan at work, you can still fund your IRAs
up to $2,000. But it won't be fully deductible if your adjusted gross
income exceeds $40,000 for a joint tax return or $25,000 for an
individual return. Above those levels, you lose $10 of deductibility for
every $50 in income.
And be careful about pooling deductible and nondeductible
contributions in the same IRA.
Taxes get tricky when you start withdrawing money later on.
For more information , check out "J.K. Lasser's Your Income Tax 1997"
(Simon & Schuster). It's cheap, $14.95, easy to read and thorough.