New Year, New Tax-Saving Opportunities

Teachers, you should save your receipts from classroom purchases too. While the $250 teacher's deduction is also scheduled to end in 2005, that too might resurface in 2006. So keep track of your out-of-pocket expenses.

And finally, there's a new saving tool in town. The Roth 401(k) will become available in January. Starting in 2006, if your employer's 401(k) plan allows it, you'll be able to designate part or all of your 401(k) contribution to a Roth IRA. As with a regular Roth IRA, your contributions to a Roth 401(k) are nondeductible, but the upside is that all of the income will be tax-free when you take it out in retirement.

Even better, the contributions in a Roth 401(k) follow 401(k) rules, not the regular Roth IRA rules. That means you can put up to $15,000 (or $20,000 if you're 50 and over) in a Roth 401(k), as opposed to only $4,000 (or $5,000) in a regular Roth. And there are no income limits to the Roth 401(k). So whereas a married couple filing jointly cannot contribute to a regular Roth if their adjusted gross income exceeds $160,000, the sky's the limit with a Roth 401(k). Be sure to ask your HR folks about this new offering.

And take advantage of all the good that's coming in 2006. We've got plenty of Hollywood gossip, tons of new techno gadgets and a fair amount of tax savings to keep us busy throughout the year.

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