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Consider an IRA!

What’s an IRA?

An individual retirement account, or IRA, is just as it sounds – an account that helps you save for retirement. There are two different types, too; a traditional or pre-tax IRA and a Roth or after-tax IRA.

  • Traditional IRA – a traditional or pre-tax IRA allows you to save for the future while limiting your tax liability now. Contributions to your IRA are made tax free, but you’ll have to pay them when you withdraw the money.
  • Roth IRA – a Roth or post-tax IRA still allows you to save for retirement, but you pay taxes on the contributions now. Why would you want to do this? Because when you withdraw the money, that money and the interest accrued will be tax-free!

Where should I get an IRA?

Several companies offer IRAs, but there are some advantages to getting an IRA with your community bank versus the big investment firms.

  • Guaranteed rate of return – Yep, you read that right. When you get an IRA from your community bank, you’ll get a guaranteed rate of return. Other IRAs are tied to the market and with that comes risk. You may potentially earn more interest with an IRA that’s tied to the market, but you might also lose money.
  • Your money stays here – The money that you put into your IRA will be invested directly into your community. It won’t go to New York, San Francisco or overseas. And, if you ever have questions or concerns, you can just stop in.

Why get an IRA?

The future will be here someday, so why not prepare for it now? By setting aside a small percentage of your pay, you can be on your way to a secure retirement. And, if you have retirement savings in other places, maybe from a previous 401(k), you can easily roll those into your IRA.

To learn more about IRAs, or to set one up, contact Auburn State Bank today.

 

2019 Tax Update

‘Tis the season … to file your taxes! 5 things to consider when filing your taxes this year and 1 thing to be aware of.

It may not be as fun as the holidays, but ‘tis the season for filing your taxes! And, some things have changed since you filed last. Late 2017, sweeping tax reform changes were signed into law, making this the first tax season the changes take effect. Here are 5 things you need to know this tax season:

  1. Tax brackets have changed – One of the biggest changes was the adjustment of the tax brackets — there are still 7 brackets as in years past, but tax rates have been reduced for most. For example, in 2017 a married couple filing jointly earning $50,000 a year, would have a tax rate of 15%. This year, that same couple would have a tax rate of just 12%.1

 

  1. HELOC interest is still tax-deductible … sometimes – Home Equity Lines of Credit (HELOC) have long been used for a myriad of things including paying for higher education or paying off credit card bills. But, under the new law you can only deduct interest paid toward a HELOC that was used for home improvements, like a remodel or an addition.2

 

  1. The Child Tax Credit has doubled – Under the new tax code, the Child Tax Credit increased from $1,000 to $2,000 per qualifying child under the age of 17. You may also be eligible for a $300 credit for each dependent that isn’t a child.3

 

  1. 529’s are for more than just college – In the past, 529 college savings plans were for just that – college. But now, you can use that money for other educational expenses including private school or tutoring. The best part? The money will grow tax-free while your child grows.4

 

  1. Contributions to retirement accounts are still tax-free – One thing that didn’t change with the new tax reform is that contributions to retirement accounts and the interest earned are tax-free until they’re withdrawn. In other words, by saving for your retirement in an account such as an individual retirement account (IRA), you could be reducing your taxable income now and setting yourself up for success later.5

 

If you didn’t contribute to an IRA in 2018, set one up now to help reduce the taxes you’ll owe next year and start earning interest. Contact the team at Auburn State Bank to learn more.

Warning: Fraudsters are trying to steal tax-refunds – Over the past few years, criminals have started impersonating the IRS to trick innocent tax-payers into paying them money. Remember – the IRS will not initiate contact with you by phone, email, text message or social media. If someone claiming to be the IRS contacts you through one of these channels, don’t reply or share your information.

This article is meant to be educational. Please visit IRS.gov or contact your tax professional for further details.

1 https://www.kdpllp.com/2017-vs-2018-federal-income-tax-brackets/

2 https://www.schwab.com/resource-center/insights/content/is-interest-on-heloc-still-tax-deductible

3 https://turbotax.intuit.com/tax-tips/irs-tax-return/2017-tax-reform-legislation-what-you-should-know/L96aFuPhc

4 https://www.daveramsey.com/blog/tax-reform-bill

5 https://money.usnews.com/money/retirement/articles/2018-10-29/how-to-use-retirement-accounts-to-reduce-your-2018-tax-bill

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