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BUSINESS Thursday 18 april 2019
A25

Liz Weston: Your 401(k) just got more valuable

By LIZ WESTON federally declared disaster vantage of those deduc- can DEDUCT depends on and use the refund to help
NerdWallet area. tions, but the vast majority your income. Check the IRS replace money deducted
Associated Press — State and local tax de- of working people can con- site for details.) from your paycheck.
If your tax refund this year ductions are capped at tribute to retirement plans, Contribution limits are high- If you don’t mind a smaller
was disappointing, you er for workplace plans such refund and just want to pay
may be able to do some- as 401(k)s: $19,000 for 2019, less taxes, another possibil-
thing about it: Contribute or $25,000 if you’re 50 or ity is reducing your with-
more to a retirement fund. older. If you have a work- holding and channeling
Tax-deductible contribu- place plan, your company the additional money into
tions to 401(k)s, IRAs and also likely offers matching your retirement fund, Tay-
other retirement accounts funds, says Jarod Taylor, lor says. Taylor also advises
are among the few remain- a financial counselor in clients to look for small ex-
ing ways to reduce taxable Westerville, Ohio. penses to trim, such as ne-
income if you don’t itemize “Let’s say you put in 4% (of gotiating a cheaper cable
deductions. And few of us your pay), and your em- package and avoiding
do these days: Only about ployer matches that up to bank fees.
1 in 10 taxpayers is ex- 4%,” Taylor says. “You just “You’ve already been liv-
pected to itemize now that gave yourself a 4% bonus.” ing without that money, so
Congress has nearly dou- Lower-income taxpayers just funnel that off to saving
bled the standard deduc- may receive an additional for retirement,” Taylor says.
tion, tax experts say. That’s benefit: a tax credit of up to Even small amounts can
down from about 1 in 3 be- $2,000 for single people or add up. As traditional pen-
fore the law changed. $4,000 for married couples sions become rarer, it’s im-
FEWER WAYS TO TRIM TAX This April 2017, file photo provided by NerdWallet shows Liz filing jointly that can further portant for most people to
BILLS Weston, a columnist for personal finance website NerdWallet. reduce the cost of con- save if they want a com-
As a result, many of the tra- com. tributions. Tax credits are fortable retirement.
ditional tips and tricks for Associated Press even more valuable than “You don’t want to work
reducing tax bills either no deductions, and it’s rare to for many, many years and
longer work or are of limited $10,000. says Michael Eisenberg, get both at the same time. wind up, if you can help
help. Deductions for mort- — Home equity loan in- a CPA personal finance Credits of 50%, 20% or 10% it, living on Social Security
gage interest, charitable terest is deductible only specialist with the AICPA’s of retirement contributions alone,” Eisenberg says.q
contributions and medical if the money was used to National CPA Financial Lit- are available for singles
expenses, for example, can substantially improve your eracy Commission. with adjusted gross income
be taken only if you itemize. home. If you don’t have a work- up to $32,000 or $64,000 f
In addition to increasing Student loan interest is still place plan such as a 401(k), or a married couple filing
standard deductions, the deductible if you don’t you can make tax-deduct- jointly.
tax law enacted in Decem- itemize, as are certain self- ible contributions to an IRA HOW TO FIND THE MONEY
ber 2017 also did away with employment expenses. as long as you’re under For many people, tax re-
personal exemptions and You can reduce taxable 70½ and have earned in- funds aren’t “extra” money.
curbed or eliminated many income by contributing to come, typically from salary, Every dollar may be need-
other common deductions: workplace flexible spend- wages or self-employment ed to catch up on overdue
— Unreimbursed work ex- ing accounts and the income, that’s at least bills or pay for health care.
penses, tax prep fees and health savings accounts equal to your contribu- If that’s not the case,
job search costs are no lon- that are paired with high- tion. People can put up to though, you could put a
ger deductible. deductible health insur- $6,000 into an IRA in 2019, chunk of this year’s refund
— Moving expenses aren’t ance plans. or $7,000 if they’re 50 or into a retirement account.
deductible unless you’re RETIREMENT PLAN CONTRI- older. (If you or your spouse You can do that directly,
active-duty military. BUTIONS OFFER MULTIPLE has a workplace plan, you by opening or contributing
— Casualty and theft losses BENEFITS can still CONTRIBUTE to an to an IRA. Or you can boost
are deductible only in a Not everyone can take ad- IRA, but how much you your 401(k) contribution