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taxes

5 Last-Minute Ways to Cut Your Tax Bill

The tax deadline is just days away, but you still have time to reduce your tax bill or help a young worker get a jump-start on saving for retirement if you contribute to these five tax-friendly accounts.

Question: We forgot to make the $6,000 catch-up contribution to my husband's 401(k) in 2017, even though he's older than 50. We know it's too late now, but are there other retirement-savings accounts in which we can make a 2017 contribution before the tax-filing deadline?

Answer: You still have until April 17, 2018—this season's tax deadline—to make 2017 contributions to other types of tax-advantaged accounts that can help you save for retirement or other future expenses. Here are five of them:

IRA With Catch-Up Contributions

Your husband still has several days to contribute up to $6,500 to an IRA for 2017. He can contribute the full amount to a Roth IRA if your joint modified adjusted gross income was less than $186,000 in 2017, or he can make a partial contribution if your joint income was less than $196,000. (Single filers can contribute the full amount to a Roth if their income was less than $118,000 in 2017, with contributions phasing out at $133,000.) You won't get an income-tax deduction for Roth contributions. But you will be able to withdraw the money tax-free in retirement, and you can withdraw your contributions without penalties or taxes at any time.

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Or your husband can make a tax-deductible contribution of up to $6,500 to a traditional IRA if your joint income for 2017 was less than $99,000. (Partial contributions phase out at $119,000.) The income limits for making deductible contributions to an IRA would be higher if he didn't have a retirement plan at work. For more information about the 2017 and 2018 income limits for deductible IRA and Roth IRA contributions, see the IRS's IRA Contribution Limits fact sheet.

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And if you earned income from a job, you too can contribute up to $5,500 to an IRA for 2017, or $6,500 if you were 50 or older in 2017.

Spousal IRA

If you didn't earn income last year, your husband can contribute to an IRA on your behalf. (This is also a strategy to keep in mind if one spouse is working but the other is retired.) Provided your husband has sufficient earnings to contribute to IRAs for both of you, he can salt away up to $6,500 for each of you if you were both 50 or older in 2017.

Health Savings Account

An HSA isn't a retirement account per se, but it can be a great way to save for medical expenses in retirement. Those costs average $275,000 over the lifetimes of a 65-year-old couple retiring in 2017, according to Fidelity.

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You can make a tax-deductible contribution to an HSA up until the tax deadline if you had an eligible high-deductible health insurance policy. For 2017, the deductibles must be at least $1,300 for single coverage or $2,600 for family coverage. You can contribute up to $3,400 to the HSA if you had single coverage or up to $6,750 if you had family coverage, plus a $1,000 catch-up contribution if you were 55 or older in 2017.

You can't contribute to an HSA after you enroll in Medicare, but you can use the money tax-free for deductibles, co-payments and other out-of-pocket medical expenses at any age. Also, after age 65, you can use the money tax-free for Medicare Part B, Part D and Medicare Advantage premiums. See How Much Can You Contribute to a Health Savings Account for more information about the contribution limits if you had eligible coverage for all or part of 2017.

Roth IRA for a Kid

You have time to help your kids or grandkids save for retirement, too. Kids of any age who earned income from a job in 2017 have until the April 17 tax deadline to contribute to a Roth IRA. The child can contribute up to the amount he or she earned from working for the year, but no more than $5,500 for 2017. You can give the money to the child to contribute.

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Contributing even a little bit of money to a Roth can give teens a huge head start on building tax-free savings for retirement, especially if they continue to make contributions as they work through the years. And they can withdraw their contributions at any time, without penalties or taxes, if they need extra money for a house down payment or a back-up emergency fund. See Helping Young Workers Open a Roth IRA for more information.

Contribute to a 529 College-Savings Plan

Not a retirement-saving plan, but another opportunity to save for the future—if you have children or grandchildren—and get a break on your 2017 taxes in a few states. Some states required you to fund the plan by December 31 to deduct your contributions on your 2017 tax return. But Georgia, Iowa, Mississippi, Oklahoma, Oregon, South Carolina and Wisconsin give residents until the tax deadline to make 2017 contributions and take a state income-tax deduction if they qualify. Visit Savingforcollege.com for more information about each of these states' rules. Not only can you use the money tax-free for college tuition, room and board, books, and fees, but now you can also withdraw up to $10,000 per beneficiary tax-free to pay tuition for kindergarten through 12th grade. See 529 Savings Plans Have More Uses—But States Need to Catch Up for more information about the new rules.

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