Are you facing a tax liability on your 2016 return or looking for a bigger tax refund? There's little you can do now to reduce the tax, but there's at least a couple options that may be available to you if you act by the tax return due date, which is April 18th this year.
Traditional IRA contributions may be wholly or partially deductible for 2016. If you had sufficient earned income during 2016, you can contribute up to $5,500 annually to a Traditional IRA ($6,500 if you're age 50 or over). The contribution limit is indexed annually for inflation, but it remains the same in 2017. The deduction is phased out at certain income levels for active participants in employer-provided retirement plans. The phase-out range for single filers who are active plan participants is between $61,000 and $71,000 of modified adjusted gross income (MAGI) and between $98,000 and $118,000 for joint filers. If only one spouse is an active participant, the phase-out range is between $184,000 and $194,000 of MAGI. These dollar figures are also indexed annually for inflation. There are slight increases for the 2017 tax year.
Another option is available to you if you are covered by an eligible health insurance policy during 2016. If so, you can transfer money into a Health Savings Account (HSA) and take a deduction on your 2016 return. Make sure that your payment is properly coded as a 2016 contribution. Contribution limits for 2016, vary according to age and whether the policy covers one or more individuals and range from $3,350 to $8,750. Please note that these accounts are controlled and managed by you and can be invested in much the same way as your retirement accounts. If managed properly, contributions are tax deductible and the income generated is tax-free. For additional information on HSA's see my previous blog posting entitled "The Holy Grail of Tax Planning - HSA's".
Please do not hesitate to contact me if I can be of assistance.
