Preparing for Taxes - Reduce Last Year’s Taxes - This Year!
In most cases tax planning involves actions you take during a tax year. For example, if you sold a stock in December 2010 and made a profit, those profits were considered to be part of the 2010 tax year. That’s not the case where IRA contributions are concerned. As long as you contribute to a qualifying IRA by April 15, you can count that contribution in last year’s taxes and potentially reduce the total amount of tax you pay.
If you are in the 15% tax bracket, a $1,000 contribution will reduce the tax you owe by $150 and will grow, tax-free, until you start to withdraw funds when you retire.