Deducting Retirement Contributions
One of the best ways to reduce your tax bill, while increasing
your net worth and future security is to invest in a retirement plan.
When you own the show, you're in a position to tailor-make a plan
that suits your needs precisely. If you set up a plan that meets
the IRS requirements, you can make tax-deductible contributions to
the plan, which will build up tax-free until you withdraw them.
As
a self-employed business owner, your major retirement plan options
are:
- Keogh plans - defined benefit, defined
contribution, or hybrid retirement plans set up by a self-employed
person or partnership. Common types of Keogh Plans include money-purchase
plans and profit-sharing plans.
- Simplified Employee Pensions (SEPs) -
a very flexible, easy plan to set up that involves making contributions
to special Individual Retirement Accounts (IRAs) set up for the business
owner and each eligible employee.
- SIMPLE plans - a type of simplified
retirement plan, the Savings Incentive Match Plan for Employees (SIMPLE
plan, which allows employees to make elective contributions of up
to $12,000 per year in 2014 ($12,500 in 2015), and requires employers
to make matching contributions.
- Individual Retirement Accounts (IRAs) -
the easiest solution to retirement savings, although your contributions
are generally limited to $5,500 per year in 2014 and 2015.
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