No. of Recommendations: 6
I'm really cheesed. Man, they make it so it's impossible to get ahead. We just finished our taxes and got reamed. Why? Because we were trying to save many instead of spending it. But if we would have spent it on deductions, we would have gotten things we wanted for the same as we are handing over to the IRS.

Probably not. Even if you had spent that money and got some sort of deduction, you'd only be getting about 28 cents back for every dollar spent, so you'd still be out that 72 cents. By not spending, you still end up with more money in your pocket even after paying the taxes.

Since I am not maxing out our Roths, would it be advisable to get a traditional or a SEP anyway and just split some of those payments so that we would have some extra tax write offs? (Even though we have now determined if there is anything deductible and I want it in the slightest way, we will be buying it.) :-/

And if I should get a tax shelter IRA, which should it be? Trad or SEP? I did notice something about income restrictions for taking deductions for a traditional.


I'd actually try to be maxing out the Roth first even though it is after-tax dollars because the money comes out tax-free on the other side. If you think you will be in the same or higher tax bracket, then the Roth makes more sense than a deductible Traditional IRA. If you think you will be in a lower tax bracket, then the Traditional IRA makes more sense.

However, if you are self-employed, I think you are much better off with a self-employed type of retirement account than a Traditional IRA because you can put so much more money away. DH has a solo 401k, and I am able to put his own $23k ($17,500 contribution plus $5500 catch-up contribution), but I can also then put an employer-match or profit-sharing amount in as well, so I save a ton more for him than I can for me as a W2 employee. Compare that to the $5500 plus $1000 catch-up contribution for either a Traditional or Roth IRA, and you're much better off in some sort of self-employed plan.

If you can find the money to put into a self-employed IRA, this is a great way to go. I actually put aside money every 2 weeks, which is my bill-paying cycle, and then see how much DH can put into his solo 401k when I do the taxes. That's also when I figure out if we can contribute to a Roth based on our income for the year because although we are over the limits in most years, there are some years (like this past one) where we can contribute, and I find money for that.

I like the explanation of the various self-employed plans that are available on the Fidelity website here https://www.fidelity.com/retirement-ira/small-business/compa... although you can have these plans at any broker.
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