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Bankrate's 2010 Tax Guide
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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.


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.



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