It’s not too late! You have until April 17, 2018 to make a qualified IRA contribution to receive a 2017 deduction or tax credit.
Depending on your income level, you may also be eligible for a Saver’s Credit on top of your tax deduction.
The Two Types of IRAs & Your Taxes
IRAs – Individual Retirement Accounts – can help you save for retirement. Most working taxpayers are eligible to start or contribute to an IRA.
There are two types of IRAs – a traditional IRA and a Roth IRA.
Contributions to traditional IRAs are usually tax deductible. Distributions from IRAs are usually taxable.
With a Roth IRA, you contribute after-tax dollars. So you are not getting the tax deduction you would with a traditional IRA on the front end. The upside is that, when the time comes, your qualified distributions are tax-free.
2017 Contribution Limits
The IRA contribution limit for 2017 is $5,500. If you are 50 or older at the end of 2017, that limit increases to $6,500. These limits are the same for Traditional and Roth IRAs.
If you have access to a retirement plan from your employer, though, the limit for traditional IRA contributions is lower. This applies to you if you have:
- Adjusted gross income (AGI) of $0 to $10,000 and are married filing separately
- AGI of $62,000 to $72,000 and are single and head of household
- AGI of $99,000 to $119,000 and are married filing jointly or a qualifying widow(er)
- AGI of $186,000 to $196,000 and are married filing jointly if the IRA contributor is not covered by a workplace retirement plan but the spouse is
For Roth IRAs, the contribution limit is phased out for those who hit certain income levels:
- AGI of $0 to $10,000; married filing separately
- AGI of $118,000 to $133,000; single and head of household
- AGI of $186,000 to $196,000; married filing jointly
How Your Spouse Figures Into This
If neither you nor your spouse was covered by an employer retirement plan for any part of 2017, you can take a deduction for traditional IRA contributions.
The contribution limit is $5,500 for those under age 50, $6,500 for those over 50, or your total compensation… whichever is less.
Your Age & Your IRA
Starting in the year you reach 70½ or older, you can’t make regular contributions to a traditional IRA.
You can still contribute to Roth IRA at any age. You can also make rollover contributions from other accounts to either type of IRA.
Who Gets a Saver’s Credit?
If your income falls below certain levels, your IRA contributions may be eligible for a Saver’s Credit. This can increase your refund or reduce the tax you owe.
The Saver’s Credit limits for 2017 are:
- $31,000 for single and married filing separately
- $46,500 for head of household
- $62,000 for married filing jointly.
The amount of the credit you will receive is based on several factors. One of those factors is how much you contributed to an IRA or other qualifying retirement programs.
To claim the Saver’s Credit, use Form 8880.
Still Got Questions?
The IRS provides more details on your IRA contributions in its Publication 590-A.
At SFS, we are happy to help you in determining your maximum allowable deductions for IRAs. Call our office for an appointment at (772) 337-1040 or make an appointment online now.