The 2017 tax season is almost here. Like everyone else, you want to take advantage and receive the highest amount of deductions possible, getting the best refund back! But, where to start? One great way to take advantage of tax season is contributing to your IRA account. You can make contributions throughout the year into your IRA or you can make a single lump sum contribution before the tax deadline on 04/17/2018 (for the 2017 tax year). So, how do you know how much you can contribute?
For the 2017 tax year, you can contribute up to $5,500.00 to your IRA if you are under the age of 50 years old. Once you turn 50, you can contribute $6,500.00 to your IRA yearly without taking an excess contribution penalty for the year. This rule allows those who are closer to retirement to “catch up” and add more to their IRA. Once you reach 70 ½ years of age, you cannot make contributions to your IRA anymore, although if you have a Roth IRA, you can still contribute. After making the smart choice to contribute to your IRA yearly, before filing your taxes; you may be wondering what tax deductions you may receive.
There are two scenarios that can apply to you and your household. The first scenario is employer provided retirement plans. If your employer provides you with a retirement plan at work- that is fantastic! This does not mean you shouldn’t have your own IRA account independently from work as well. You can potentially take advantage of tax deductions each year from your personal IRA. Any contributions made to an employer sponsored retirement for the year are not tax deductible. If you or your spouse, if you are married, have an employer sponsored retirement plan, then your Modified Adjusted Gross Income (MAGI) will determine how much of deduction amount you can claim for your IRA, if any. Your accountant will have the limitations on income for the year that will still allow you to claim a deduction on your IRA contributions. The second scenario is if neither you or your spouse’s employer, if you are married, offer a company sponsored retirement, you may take a full deduction on your taxes for any contributions made that year. Again, you should speak with your accountant for the exact income limitations for each scenario.
If you do not have an IRA account, you should consider opening one today.
Not only are there potential tax deductions that you can benefit from yearly,
you will also benefit from compounding interest and planning for your future!
Written by: ||cassandra hartman, office manager||