Now that you have until July 15, 2020, to file your 2019 income-tax return, you also have extra time to save in several types of tax-advantaged accounts. Even if you worry about tying up money in long-term savings during an uncertain time, these accounts can help you save money on taxes now or grow tax-free for the future (or both). And you can also withdraw money from some of these accounts without penalty if you need it in an emergency or for medical expenses.
More time to save in an IRA. You have until July 15, 2020, to save in a traditional or Roth IRA for 2019. You can contribute up to $6,000 to this tax-advantaged account, or $7,000 if you were 50 or older in 2019.
If your 2019 modified adjusted gross income in was less than $203,000 if married filing jointly or $137,000 if single, then your contributions can be to a Roth IRA. You won’t get a tax break now but you can withdraw your earnings tax-free after age 59 ½, as long as you’ve had a Roth IRA for at least five years. And an extra benefit that can be especially helpful during this economic uncertainty: You can withdraw your contributions at any time without penalty or taxes, which can help provide a back-up emergency fund. Contributing to a Roth IRA can be a good way to set aside extra money for the future if you worry that you might need the extra cash in an emergency.
You usually need to have earned income from working to qualify to make IRA contributions. If you didn’t work but your spouse did, then he or she can contribute to an IRA on your behalf (see How spousal IRAs work for more information). Kids of any age who earned income from a job can contribute to a Roth IRA, too (up to the amount they earned for the year, up to the $6,000 maximum). You can give your kids or grandkids the money to contribute.
Freelancers get extra time for tax-deductible savings. You also have until July 15, 2020, to save in a Simplified Employee Pension (SEP) if you had any freelance income in 2019. Your contributions are tax-deductible and grow tax-deferred until retirement. The contributions are based on your business income — you can contribute up to 20% of your net earnings from self-employment in 2019, up to $56,000. You can save in a SEP even if you had just a little freelance income, and even if you already save in a 401(k) or other retirement plan at a full-time job.
More time to get a triple tax break from a health savings account. If you had a health insurance policy in 2019 with a deductible of at least $1,350 for self-only coverage or $2,700 for family coverage, then you may be eligible to contribute to a health savings account (ask your insurer to make sure your policy was HSA-eligible).
You have until July 15, 2020, to contribute up to $3,500 to an HSA if you had self-only insurance coverage, or up to $7,000 if you had family coverage, plus $1,000 if you were 55 or older in 2019. Your contributions are tax-deductible, the money grows tax-deferred in the account, and you can take tax-free withdrawals for eligible medical expenses in any year.
If you already contributed some money to an HSA in 2019 — either through your employer or on your own — see if you reached the maximum contribution limit. If not, you can set aside some extra money now and boost your tax break. If you do end up having any out-of-pocket medical expenses, you can withdraw the money at any time — either right away or years in the future — tax-free to pay those bills. For more information about HSA rules and eligible expenses, see Six strategies to make the most of a Health Savings Account.
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