We are down to the last few weeks of 2021, but there is still time to take smart year-end tax actions. Your IRA will thank you.
- Charitable Contribution Deductions
Don’t forget charitable contribution deductions. Select the charity of your choice and make a contribution before the end of the month and take the deduction on this year’s tax return, if you itemize. You can even do this with a Self Directed IRA to satisfy an RMD.
- Business Owners
Hire your kids! They can earn up to $12,400 before they need to pay income tax. Remember: every dollar that you pay them is a dollar less that you earn. Hence, your tax bill will be reduced.
If you want to make a big difference in their life, contribute up to $6,000 of their income to a Roth IRA for the minor. Is that a good idea? How much more would you have today if your parents helped to start an IRA when you were 8,10, or 12 years old?
Do you have a Required Minimum Distribution (RMD) you must take from your Traditional IRA?
- Convert it to a Roth account before 12-31-2021. Roths have no RMD.
- Take your RMD by using it to make a qualified charitable contribution.
- This is a win-win. The charity benefits and the distribution does not appear on your tax return. The distribution will not affect your Social Security benefits.
- IRA Contributions
There is no longer an age limit for making an IRA contribution. Unlike before, as long as you have earned income, you can keep contributing to your IRA.
- If you still have a Traditional IRA you will get a tax deduction this year.
- If you have a Roth IRA you will not get a tax deduction this period, however, all your growth can be income tax-free when you do start to take distributions.
- Check out our “Am I Too Old to Start a Roth IRA?” blog.
Have a Happy and Healthy New Year!
Don’t have a Self Directed IRA? Don’t wait! Take back control of your retirement funds before it is too late. Click here to see our process.
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