Two tax-smart ideas for your tax refund
Are you looking forward to your tax refund? By now you know how much you'll be getting and approximately when the cash will land in your bank account. The only question is, what's the best way to put the money to work for you?
Here are two tax-smart ideas.
Fund your IRA. Depending on your income, making a contribution to a Traditional IRA could result in a deduction on next year's tax return – and possibly a credit of as much as $2,000. For 2016, you can contribute a maximum of $5,500 to your IRA. Add another $1,000 for a total of $6,500 if you're age 50 or older.
Invest in knowledge. Establish a qualified tuition plan, commonly called a Section 529 plan, or a Coverdell Education Savings Account. While contributions are not tax-deductible, the account earnings grow tax-free, and distributions used for educational expenses are also generally tax-free.
Do you need work-related training? Education required by your employer or courses that improve or maintain skills necessary for your present job, can qualify for a deduction.