Are you working for someone or are you working for yourself?
In regards to retirement plans, there are some things you need to be aware of so you can take advantage of the situation.
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
Here are three things you need to consider:
1. Maximize employer matching. If your employer offers a 401(k) plan, try to put in at least the contribution amount in order to receive the maximize amount your company will match. Consider this free money! This also applies to self-employed. You can set-up a profit-sharing plan that will allow you to contribute up to 25% of your salary. This is tax deductible to the business but not taxable to the employee. It’s a win-win!
2. Try to catch-up. If you’re age 50 or older, you are allowed to make extra contributions to your retirement plans. These “catch-up” contributions depend on the type of retirement plan. Here is the list of catch-up items: IRA – $1,000, Simple – $3,000, and 401-K & 403-b – $6,000.
3. Maximize total contribution limit. The total limit for 2016 is $53,000. So if you are an employee, try to take advantage of any of your company’s retirement plans. Now, if you are the employer, try to structure different plans in order to maximize your contributions up to the limit.
There you go! Consider these strategies the next time you look into your retirement plans and I guarantee you…you would say…I lowered my tax now!
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Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com