![]() This may help keep you in a lower tax bracket after you stop working. You don’t get an upfront tax deduction, but your retirement withdrawals would be tax- and- penalty free, assuming you’ve met the 5-year aging rule and other conditions. 1 Alternatively, you could contribute to a Roth IRA or Roth 401(k). If you have access to a workplace plan such as a 401(k) or a traditional individual retirement account ( IRA) each dollar you contribute may reduce your annual taxable income. Deducting charitable contributions may be subject to AGI limits depending on the receiving charity and what you donated. However, this strategy requires having the financial capacity to pack more than a year’s worth of your contributions into a single year. Charitable contributions for several years made at once may allow the total of itemized deductions to exceed the standard deduction, making it possible to obtain a tax deduction for at least part of the charitable contributions. This strategy can work well when your total itemized deductions for a single year fall below the standard deduction. Bunching means concentrating deductions in a single year, then skipping one or even several years.
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