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PROCRASTINATION IS EXPENSIVE

January 12, 2007

One of the most common questions for tax practitioners is deadlines. People want to know what is the last day they can do this or that. That's often the wrong question.

A savvy taxpayer also asks about first days. A wise investor wants to know what the earliest day is for funding an individual retirement account, health savings plan, or section 529 plan. The answer: January 1. By funding the plan on the first available day, the taxpayer begins to shelter investment earinings up to 15 1/2 months earlier than they would otherwise.

So don't waste another day of 2007. Fund your contributions now. The 2007 limits are:

IRAs (Traditional and Roth): $4,000, plus an additional $1,000 for those who are 50 years old by the end of 2007.

HSAs: $2,850 for single coverage and $5,650 for family coverage, if you have a qualifying high-deductible plan. Taxpayers who are 50 years old by the end of 2007 can contribute an additional $700.

College Savings Iowa: Iowa taxpayers can deduct on their Iowa 1040s contributions of up to $2,595 per donor, per donee for 2007. That means an Iowa couple with two children can deduct $10,380 in 2007. You can contribute larger amounts, too. You can also contribute to other Section 529 plans; other 529 plans also offer tax deferral of earnings and tax-free withdrawals for college costs, but they provide no Iowa deduction.

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