The market continued its up and down swings, with the S&P 500 ending the week down just over 1%. Concerns about AI disruption overcame a strong jobs report and a lower-than-expected inflation report, with the Consumer Price Index falling to 2.5%, a five-year low.
We’re also heading into tax season, and there are still some moves that you can make to lower that bill. You have until April 15th to fund your IRA and Health Savings Account, if you are eligible.
Your ability to deduct contributions to an IRA depends if you have a retirement plan at work and on your income. The maximum amount someone under 50 can contribute is $7,000, with an additional $1,000 available for those over 50. If it’s not deductible, and you do not have IRA, you may want to discuss making a non-deductible contribution with your financial advisor or tax professional. You can then convert those funds into a Roth IRA. There’s no tax benefit now, but a Roth IRA provides the opportunity for tax-free growth and withdrawals in retirement.
For individuals making less than $39,500, you may also be eligible for the Saver’s Credit. While a deduction reduces the amount of income you pay taxes on, a credit directly reduces your tax bill. Depending on your income, the Saver’s Credit can offset up to $1,000 of taxes, possibly offsetting your contribution.
If you have a High Deductible Health Plan, you can contribute $4,300 as an individual or $8,550 as a family to your Health Savings Account. This provides an immediate tax deduction.
Finally, if you are self-employed or have a side hustle, you can contribute 20% of what you net from that work to a SEP IRA. Unlike regular IRA and HSA contributions, which must be made by April 15, this tax deduction is available until you file your return.
Your action item this week is to check your auto insurance coverage. We generally recommend $250,000 per person/$500,000 per accident in liability and uninsured/underinsured motorist coverage, as well as $10,000 in Personal Injury Protection, or PIP.
Check out our website and Facebook page for more information and for our educational events, like our signature Women, Wine & Wisdom™ events.
CovingtonAlsina is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.