IRAs are another way to save for retirement while also reducing your taxable income. Depending on your income, you may be able to deduct any IRA contribution on your tax return. Like a 401 (k) or 403 (b), IRA money will increase with deferred taxes and you won't pay income tax until you withdraw it. In the eyes of the IRS, your contribution to a traditional IRA reduces your taxable income by that amount and therefore reduces the amount you owe in taxes.
You may be able to deduct some or all of your contributions to a traditional IRA. You may also be eligible for a tax credit equal to a percentage of your contribution. The amounts of your traditional IRA, including profits, are generally not taxed until they are distributed to you. However, any amount left in your IRA when you die will be paid to your beneficiary or beneficiaries.
If you're looking to save last-minute taxes this year, you'll want to make sure you select the right IRA: the traditional IRA. While a tax break for this year is a great incentive to make a contribution to the IRA, the real value of the IRA is its ability to protect your investments from taxes. Your ability to deduct an IRA contribution in part or in full depends on how much you earn, whether you or your spouse are currently contributing to other qualified retirement plans, and what type of IRA you have.