Does tax season have you feeling under the weather? The simple cure may be an IRA Contribution.
If it’s springtime, then there are two things that are certain – allergies are in full swing and taxes will be coming due. But relief may be just around the corner! You can still make a contribution to your IRA for 2016 up until April 18, 2017. This ensures that you are taking full advantage of the opportunity to save for your retirement while enjoying the added benefit of a possible tax deduction.
If you, and your spouse if you are married, are not contributing to a retirement plan at work then your contribution is 100% deductible! Your deduction may be limited if you (or your spouse) are covered by a retirement plan at work and your income exceeds certain levels. The contribution limit for traditional and Roth IRAs for 2016 is $5,500.00 ($6,500 if you’re age 50 or older).
Saving in an individual retirement account can significantly reduce your tax bill and help your retirement funds grow faster. The dollar value of the tax deduction depends on your income tax rate. The rewards of consistently contributing to your retirement can be vast.
Below are some additional options to consider.
- If your income is below a certain threshold, an IRA contribution can additionally qualify you for the saver’s credit. The amount of the credit is 50%, 20%, or 10% of your retirement plan or IRA contributions up to $2,000 ($4,000 if married filing jointly).
- Your income tax refund can be directly deposited into an IRA. By using IRS Form 8888 you can split your tax refund between several accounts including an IRA.
- Setting up a direct deposit from your checking account to an IRA each month will ensure you don’t forget to make your contributions.
- You may also want to consider opening a Roth IRA. Roth IRAs don’t get you a tax deduction in the year you make the contribution but no income tax will be due on the earnings that accumulate in the account. Roth IRA withdrawals made in retirement from accounts that are at least five years old will be tax-free.
So don’t let tax season leave you feeling unwell…make your contribution today!