Earlier this year, NerdWallet surveyed Americans and found that the average adult gets a 50 percent, a failing grade, on personal finance questions related to income tax. Sure the tax code is convoluted and April seems so far away, but consumers should seek out expert advice and learn as much as they can about tax basics and how financial products and decisions impact liability. With 2016 just around the corner, don't forget that there is still time to make some smart moves that will help you come tax time next year.
Here are 10 simple year-end income tax tips to help you organize your finances and set yourself up for the New Year:
- Make 401(k) contributions by the end of the year. Many people wonder what to do with their year-end bonuses or cash gifts from family. Using a portion of it to help max out retirement contributions for the year can be a great way to bolster investments or savings especially if you haven't been good at those regularly. For 2015, the limit was raised to $18,000.
- Federal-tax-free growth and tax-free withdrawals for Roth IRAs
- The ability to deduct contributions on income taxes now and pay the taxes upon qualified withdrawals in retirement with traditional IRAs.
Note: AGI limits apply for deductibility for both Roth and traditional IRAs.
Whether you take one of these steps or all of them, the most important thing you can do now is plan. Plenty of questions can accompany tax season, given the complex factors at work. Taking time to understand your financial situation, tax liability and any federal or state changes can help simplify the process and ensure you meet the April deadline. After all, it's not so far off.
A version of this article originally appeared on Fresh Accounts.
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