There's still time to trim your 2013 income tax bill and boost
your retirement savings at the same time.
You have until December 31 to contribute up to $17,500 to your
401(k) or to another tax-deferred retirement account, such as a
403(b) for teachers and nurses, a 457 plan for police officers and
other local-government workers, or the Thrift Savings Plan for
federal workers and military personnel. (the maximum will remain at
$17,500 in 2014).
12 Year-End Tax Moves to Make Now
At the very least, try to contribute enough to capture all of
your employer's matching contribution. Otherwise, once the year
ends, those unclaimed dollars are gone forever.
If you're 50 or older, you are allowed to put in an extra $5,500
in catch-up contributions in your workplace-based retirement plan,
sheltering up to $23,000 of your salary from federal and state
taxes in 2013 (although you'll still be nicked for payroll taxes
that fund Social Security and Medicare).
Tell your employer to adjust your remaining paychecks to boost
your contribution, if necessary. And if you receive a year-end
bonus, ask whether you can defer some or all of it to your
Low-income workers and those who work part-time or
intermittently -- perhaps you landed a new job partway through the
year after months of unemployment -- have an added incentive to
feed their retirement account. In addition to the usual tax breaks,
you may qualify for the retirement saver's tax credit, which can be
worth up to $1,000 (tax credits reduce your tax bill
Learn more about more Tax Breaks for the Middle
Class in our slide show
Extra help for the self-employed
If you are self-employed or have a sideline business, you can
stash away even more. And if you can't come up with the cash just
yet, don't worry. You won't have to fund your business retirement
account until you file your tax return next spring.
If you are self-employed with no employees (other than your
spouse), you can open a solo 401(k). You can contribute up to
$17,500 to your plan (but not more than your earnings), and your
business can kick in an additional 20% of your net self-employment
income (that's your gross self-employment income minus half of your
self-employment tax) until the total pay-in for 2013 reaches
If you're 50 or older, you can put in an extra $5,500 in
catch-up contributions, for a total of $56,500 this year. Although
you don't have to fund the account until you file your tax return
next spring (or by October 15, 2014 if you file for an extension),
you have to establish a solo 401(k) plan before the end of this
year in order to deduct the contribution from on your 2013 tax
If you have a sideline business in addition to a job as an
employee with a company that offers a 401(k) plan, you can't double
up on your 401(k) contributions. The same annual employee limit of
$17,500 (plus $5,500 in catch-up contributions if you're 50 or
older) applies whether you have one job or more. However, you can
contribute to a SEP IRA, stashing away up to 20% of your net
self-employment income up to a maximum of $51,000 for 2013 (SEP
IRAs have no catch-up provisions for those 50 and older).
What's more, you can set up and fund your SEP IRA as late as
April 15, 2014, and still exclude your contribution on your 2013
tax return. And if you file for an extension, you can delay your
set-up and funding date until October 15, 2014.