AARP Hearing Center
Are you worried because the deadline for filing federal income taxes is April 18 and your refund wouldn’t buy a stamp to mail your tax return? Or are you scared that you’re going to have to pay a big tax bill? Stop wailing and rending your garments and read these five tax tips that could help reduce your 2021 taxes. You never know: You might be able to turn that tax bill into a refund.
1. Traditional IRA contributions
You have until April 18 to contribute to a traditional IRA for the 2021 tax year. Your contribution can reduce your taxable income, which, in turn, would reduce the amount of tax you owe. If you’re under age 50, you can contribute up to $6,000 for 2021. People who are 50 and older can contribute up to $7,000. You can only contribute earned income to an IRA; Social Security payments, pension payouts, dividends and other types of income don’t count.
If neither you nor your spouse is covered by a workplace retirement plan such as a 401(k), you can deduct the full amount of your contribution. The deduction faces limits if you or your spouse is covered by a retirement plan at work, or if your modified adjusted gross income (MAGI) exceeds certain levels.
And here’s another nice thing about this tax year: There is no longer an age limit on making contributions to a traditional IRA. Prior to 2020, the cutoff was age 70½. There also is no age limit for contributing to a Roth IRA, but note that Roth contributions aren’t tax deductible, since withdrawals in retirement are tax-free.
2021 deduction limits for traditional IRAs, if covered by retirement plans
Filing status |
2021 MAGI |
Deduction |
---|---|---|
Single or head of household |
≤$66,000 |
Full deduction up to contribution limit |
|
>$66,000 and <$76,000 |
Partial deduction |
|
≥$76,000 |
No deduction |
Married filing jointly or qualified widow(er) |
≤$105,000 |
Full deduction up to contribution limit |
|
>$105,000 and <$125,000 |
Partial deduction |
≥$125,000 |
No deduction |
|
Married filing separately |
<$10,000 |
Partial deduction |
|
≥$10,000 |
No deduction |
2. Health savings accounts (HSAs)
As with IRAs, you have until April 18 to make an HSA contribution for the 2021 tax year. The maximum annual contribution you can make is $3,600 for yourself only, or $7,200 for families. If you’re 55 or older, you can toss in another $1,000.
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