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IRA Contributions

If you have a SEP, traditional, 401k, defined benefit plan or any other pre-tax retirement accounts, this is for you.....

In case you don't know what pre-tax means, here's the meaning: you don't get taxed on the money you put into the account which means you get a tax deduction in the year you make contributions.

For example, if you contribute $6,000 into your Traditional IRA in 2022, you'll get a $6,000 tax deduction for 2022.

Something to keep in mind when deciding to put money into your IRA is if your income for the year is lower than what your income will be for the following year, you may want to hold off on making a contribution. Reason why is because in a higher tax bracket, deductions help reduce your tax liability much more. So if you're going to make $100k in 2022 but are projecting $200k for 2023, it would make more sense to contribute to your IRA in 2023 because the deduction will help reduce your tax bill significantly compared to an income of $100k.

Keep in mind this really only applies if you don't have extra cash and you can only make one contribution, either for 2022 or 2023. If you have the funds for both years, go for it. Double deduction.

This situation will really only come up during tax season when you're making last minute contributions for the prior year to help lower your tax bill.

Hope this helps. Let me know if you have questions.

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