Would it be a good idea to set up a traditional IRA for tax deductions I need this year, and a Roth later?

Question

My consulting business did well enough this year that I had a bit of money due to the IRS. I planned on setting up an IRA this year since I'm in my mid-twenties. I like the tax-free potential of the Roth, but I also need to lower my AGI this year. Would it make sense to open and contribute a portion of my wages to a traditional account and deduct what I need to break even on taxes, and throw the rest into a Roth account? Not exceeding the $4,000 limit on contributions of course... The fees on the accounts should be negligable, considering that I'm working primarily with an Internet broker.

25% is my current tax bracket.

Answer 1

Sounds like a good plan to me assuming you are not in the 10% bracket. If your tax bracket is 10% or 15% I would probably go for the Roth in full as your future tax bracket should be much higher.
If you don't have employees and your AGI is low enough you might consider doing a SEP-IRA for enough to lower your taxes and then do $4,000 to the Roth account. This would get you more into retirement accounts.

Answer 2

If you are in the 25% tax bracket, you are paying several thousand dollars in taxes.

What you propose is OK. You could also open a traditional IRA and contribute $4,000. This would lower your tax bill by $1,000.
If in a future year, your tax bracket drops to 15%, then you could roll some of the traditional IRA into a Roth and pay only 15% on the rollover.