2020 Retirement Tax Savings: Maximize Your Deductions

If you're extremely organized and on the ball about your documentation, you can get your 2020 taxes filled out and filed within a few weeks. Of course, timing your tax returns is also a little bit of an art, and there can be advantages to taking it slow. One of them is knowing about all the different ways you can shave down what you owe, thanks to certain kinds of deductions and contributions.

Even if you're young — especially if you're young — you should and can be saving for retirement. One of the more common ways you can do that, if your employer doesn't offer a retirement plan or match of its own, is through an IRA. (You may have heard of traditional versus Roth IRAs; here's the difference.) Better yet, you can write off contributions to these retirement plans, bringing down your annual taxable income, even if you make them after the tax year ends.

The amount you can write off on your taxes fluctuates with inflation. For your 2020 taxes, since inflation was low, the maximum contribution to an IRA for those under the age of 50 is $6,000. Assuming Tax Day doesn't change like it did last year, you have until April 15, 2021, to sock away savings in your retirement fund, up to the annual limit.

If all this still sounds confusing or overwhelming, now is a great time to talk to a financial adviser or tax prep professional. Anyone who can get you started on a good plan for the future will absolutely pay off — and pay out — in the long term.