Click Here
Bankrate's 2010 Tax Guide
Man giving high five to dollar
taxes
10 ways Uncle Sam helps you save money

During tax-filing season, individual retirement accounts get a lot of attention because the traditional accounts are the only way to still shave some dollars off a tax bill.

But if you have some IRS refund money burning a hole in your pocket, you might want to check out the many other tax-free or tax-deferred ways to save.

Here's a look at 10 popular options.

Individual retirement accounts

Known popularly as IRAs, for 35 years these accounts have provided individuals a way to save for retirement and save on taxes. Anyone who works, either for himself or for an employer, can set aside a portion of that income in a personal retirement account.

Over the years, the concept has been refined, with tax savings and earnings possibilities enhanced. Generally, individuals with wage income (rather than self-employment earnings) will choose to contribute to either a traditional IRA or a Roth IRA.

1. Traditional IRAs

"Traditional IRA" is the name given to the original account created in 1974. This account is available to anyone younger than 70½ who earns money. The contribution limit for 2009 is $5,000 and money can be put into these accounts for last tax year, up until the April 15 tax-filing deadline. The same contribution limit applies for the 2010 tax year.

Advantages: The earnings are tax-deferred, meaning you won't owe the IRS until you make withdrawals, which you can start taking at age 59½. Workers age 50 or older (but younger than 70½) can put in another $1,000 a year. Some individuals also might be able to deduct these contributions.

Drawbacks: You'll eventually owe taxes on at least some of the money in the account. You cannot contribute once you reach age 70½. When you reach that age, you must start taking out a minimum amount based on an IRS longevity calculations.

advertisement

2. Roth IRAs

Roth IRA contributions were first accepted in 1998. That year, $8.6 billion went into these retirement plans, with another $39 billion transferred from traditional IRAs to Roths. By 2001, IRS data showed contributions to Roths had surpassed the amount going into traditional accounts.

 

 

Show Bankrate's community sharing policy
          Connect with us
REFINANCE HOME EQUITY AUTO CDs CREDIT CARDS
Product Rate Change Last week
30 year fixed refi 4.17%  0.11 4.06%
15 year fixed refi 3.21%  0.12 3.09%
10 year fixed refi 3.26%  0.15 3.11%
 
View Rates in your area Next
Product Rate Change Last week
30K FICO-based HELOC 4.67%  0.35 4.32%
50K FICO-based HELOC 4.04%  0.05 3.99%
100K FICO-based HELOC 3.88%  0.05 3.83%
 
View Rates in your area Next
Product Rate Change Last week
60 month used car loan 2.99%  0.19 2.80%
48 month used car loan 2.91%  0.09 3.00%
60 month new car loan 3.07%  0.10 3.17%
 
View Rates in your area Next
Product Rate Change Last week
1 Year CD 0.99%  0.01 0.98%
2 Year CD 1.20%  0.01 1.19%
5 Year CD 1.82% --0.00 1.82%
 
View Rates in your area Next
Product Rate Change Last week
Balance Transfer Cards 15.80% --0.00 15.80%
Cash Back Cards 16.42% --0.00 16.42%
Low Interest Cards 11.09% --0.00 11.09%
 
Next
advertisement
WEEKLY TAX TIP NEWSLETTER

Our tax expert Kay Bell provides resourceful tips and advice to help you stay prepared for filing.

advertisement

Connect with us