3 Ways You Can Still Reduce Your 2016 Tax Bill

Tax season is in full swing, and all of those 1099s and W-2s are trickling into our mailboxes. Are you worried about owing additional tax when you file your 2016 return? It may be too late make a charitable donation, pre-pay your next mortgage payment, or make an estimated state income tax payments to increase your itemized deductions for 2016, but you might have a couple options for reducing your 2016 taxable income. The best part about these deductions is, unlike prepaying your mortgage interest, you’ll keep the money in your own pocket.8koeusir1zm-jimi-filipovskiYou have until April 18, 2017, to make traditional IRA contributions for 2016, but not beyond that date, even if you file an extension.

Make an IRA contribution

For 2016, you can contribute up to $5,500 ($6,500 if you’re age 50 or older). There are no income limits for contributing to a traditional IRA, but if you have a retirement plan through your employer, your deduction may be limited.

 You can also contribute to an IRA for a spouse that isn’t working as long as you file a joint return. The maximum contribution to both spouses’ IRAs can’t exceed your joint taxable income or double the annual IRA limit, whichever is less.

Traditional IRA contributions can be taken as an “above-the-line” deduction on Line 32 of Form 1040. Above-the-line deductions can be valuable because they reduce your adjusted gross income (AGI), so they could potentially increase other tax benefits that are phased out or disallowed altogether based on AGI. Also, you don’t have to itemize to take advantage of above-the-line deductions.

Make a SEP IRA contribution

Self-employed taxpayers and freelancers may be able to put away more money for retirement and benefit from bigger deductions by opening a SEP IRA. The maximum SEP contribution can’t exceed the lesser of 1) 25% of your net profit shown on Schedule C reduced by the deductible portion of your self-employment tax, or 2) $53,000 for the 2016 tax year.

You have until the date you file your return, including extensions, to make SEP contributions. Those contributions can be deducted as an above-the-line deduction on Line 28 of Form 1040.

Make an HSA contribution

If you were covered by an HSA-eligible health insurance plan for 2016, you have until April 18, 2017, to make your contribution for 2016. For 2016, you can contribute up to $3,350 for an individual or $6,750 for a family.

To qualify for an HSA, you must be insured under a high-deductible health plan (HDHP) that is HSA-eligible. An HDHP is any plan with a deductible of at least $1,300 for an individual or $2,600 for a family. And although the average deductible for single coverage is currently $1,478, few insurance plans are actually HSA-eligible. That is because the IRS specifies that except for preventive care, “and HDHP may not provide any benefits for any year until the deductible for that year is satisfied.” So more generous plans that pay for anything other than preventive care benefits before the deductible is met are not HSA-eligible.

If you made contributions through an employer’s pre-tax plan, those contributions have already been deducted from your taxable income in Box 1 of Form W-2, but if you make contributions on your own, you can claim those as an above-the-line deduction on Line 25 of Form 1040.

This post originally appeared on Forbes.

(Image: Jimi Filipovski via Unsplash.)

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Does Disability Insurance Cover Pregnancy?

I recently started writing for brightpeak Financial and one of my first topics for them is one I wish I’d been aware of before I got pregnant in 2011.aood3vqkefq-freestocks-orgFor this piece, I got to interview a couple friends who used short-term disability benefits to help replace part of their income while they took unpaid maternity leave after the birth of their children.

As I mention in the piece, half of two-parent households in the U.S. have both parents working full-time, yet the U.S. is the only developed nation that does not mandate ANY paid leave for new parents.

I was fortunate. I’d been with my employer for more than five years so I was able to use six weeks of accumulated PTO for maternity leave and take another two weeks unpaid. But when people haven’t been with their employer very long or don’t have as generous vacation benefits, short-term disability can help bridge the gap.

Head over to the brightpeak Financial blog and check out my post, Does Disability Insurance Cover Pregnancy.

Have you used disability benefits during pregnancy? What are your thoughts?

(Image: freestocks.org via Unsplash)

How to Handle Your Finances After Divorce

When I started my freelance writing career, I almost never did interviews for the pieces I wrote. I just researched the topic and went from there. Lately, I’ve been doing a lot more interviews and, despite my tendency toward introversion, I am really coming to enjoy them.OLYMPUS DIGITAL CAMERA

When Magnify Money asked me to write a guide on handling your financial life after divorce, I got the chance to interview two Certified Divorce Financial Analysts (CDFAs), Dan Burges from Ameriprise in Southlake, TX and Avani Ramnani from Francis Financial in New York, NY.

They had some great advice, not just for the immediate aftermath, but information you can use long after the ink on your divorce decree is dry.

You can check out the guide here.

(Image credit: Daria Nepriakhina via Stocksnap.io)