Max out your IRA or 401(k)
Contributing to a 401(k) is the best way to save for retirement and cut your taxes. The maximum you can contribute to your 401(k) (an employer-sponsored plan) is $16,500 this year, $22,000 if you're 50 or over. If you're below the maximum, increase your payroll deductions as much as you can afford to by going to your plan's web site or contacting your human-resources department. An individual retirement account (IRA) is another way to save using pretax dollars. You can contribute up to $5,000 each year, $6,000 if you're 50 or over. Opening an IRA can also help lower your tax payment, and you have until April 15 to do so.