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Income tax refund: five tips for maximizing it

3. Invest in your retirement plan

Mary Knox Merrill/The Christian Science Monitor/File
David Savory (right) helps Bouchra Bouzidi file her taxes as part of the Volunteer Income Tax Assistance Program at Bunker Hill Community College in Boston in this 2010 file photo. One way you can still boost your income tax refund this year is to make a 2011 contribution to a traditional IRA.

  • By Lisa Greene-Lewis Contributor

Investing in your 401(k) or Individual Retirement Account (IRA) can increase your tax refund and fund a more comfortable retirement nest egg. A Roth 401(k) or IRA lets you build your account and withdraw your funds tax-free in retirement. A traditional 401(k) or IRA lets you take a tax break immediately and defer taxes until you withdraw your funds in your golden years. Be sure to find out what your maximum yearly contribution limits are and develop a monthly deposit plan to ensure that you can maximize the benefits of those accounts. Remember you have until April 17, 2012, to make a contribution to your traditional IRA and still boost your 2011 tax refund.

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