IRAs are designed to enable taxpayers to save for retirement and you still have time to contribute to an IRA for 2016 and, in many cases, qualify for a deduction or even a tax credit. To count for a 2016 tax return, contributions must be made by April 18, 2017.
Most taxpayers with qualifying income are either eligible to set up a traditional or Roth IRA or add money to an existing account. In addition, low and moderate income taxpayers making these contributions may also qualify for the saver’s credit when they complete their 2016 tax returns.
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Generally, eligible taxpayers can contribute up to $5,500 to an IRA. For someone who was at least age 50 at the end of 2016, the limit is increased to $6,500.
Workplace Retirement Plan
The deduction for contributions to a traditional IRA is generally phased out for taxpayers covered by a workplace retirement plan whose incomes are above certain levels.
For someone covered by a workplace plan during any part of 2016 or contributions to Roth IRAs that are not tax deductible, the maximum permitted amount of these contributions is phased out for taxpayers whose incomes are above certain levels the taxpayer’s Modified Adjusted Gross Income (MAGI) phase out range for that year is as follows:
|MAGI Phase Out Range||Workplace IRA Contribution||Workplace IRA Contribution – Married, filing Joint||Non-Workplace IRA – but married to one who is covered||Roth IRA|
|Single / Head of Household||$61,000 to $71,000||$117,000 to $132,000|
|Married filing Joint||$98,000 to $118,000||$184,000 to $194,000||$184,000 to $194,000|
|Married filing Separately||$0 to $10,000||$0 to $10,000|
For detailed information on contributing to either Roth or Traditional IRAs, including worksheets for determining contribution and deduction amounts, see Publication 590-A, available on IRS.gov.
Retirement Savings Contributions Credit
The Saver’s Credit, also known as the Retirement Savings Contributions Credit, is often available to IRA contributors whose adjusted gross income falls below certain levels. See below for 2016, the income limits:
|Married filing Joint||Single / Married filing Separate||Head of Household|
|Saver’s Credit Income Limit||$46,125||$30,750||$61,500|
Like other tax credits, the Saver’s Credit can increase a taxpayer’s refund or reduce the taxes they owe. The amount of the credit is based on a number of factors, including the amount contributed to either a Roth or Traditional IRA and other qualifying retirement programs.
Contact NGAS to prepare your 2016 tax return.