It’s Almost Tax Time
First for the bad news… Unfortunately there is no time left for you to reduce this year’s taxes unless you are able to make a big contribution to your IRA. Now for the good news… You can start planning to reduce your 2007 taxes.
If you contribute to your IRA now and you are single and have less than $50,000 adjusted gross income, your contribution will be fully deductible. On the other hand, for those who are filing jointly, you will need less than $75,000 of adjusted gross income if you want your contribution to be fully deductible. In either case, this contribution will need to be made before April 16.
For those of you who are unable to make these contributions, you will not be able to reduce the taxes from your 2006 investments now. However there are some things that you can do to help yourself in 2007:
- Invest in tax-free money funds like tax-free municipal bond funds.
- Switch your taxable bond funds to a muni fund.
- If you live in a high-tax state, like New York and California, you should invest in a state-specific muni bond fund since these are exempt from state taxes.
Hey, New here and this post intrigued me. I am confused. Are you saying that in Janaury 07 I can contribute to my 401K/IRA and have that be deducted off of my 2006 taxable income?
Another question that recently came up to me that you may be able to help me with. I make over 120,000 a year and just realized I am probably going ot be subject to AMT taxes and I didn’t realize i should have been trying to decrease my 2006 taxable income to avoid AMT.