Have you been neglecting your IRA? No worries: The Internal Revenue Service has some good news for you. Although the tax season will soon be coming to a close, you still have time to make contributions to your IRA. Depending on your situation, you can also still take advantage of a deduction or tax credit for the 2014 tax season.
Keep the following points in mind.
The saver’s tax credit could be in your future
Know that in order for your contributions to be counted, they must be made by April 15. In addition, the IRS says that if you are in the low- to moderate-income range, you may also be able to benefit from the saver’s credit, also known as the retirement savings contributions credit.
This credit will allow you to receive a tax credit for eligible contributions to your IRA or employer-sponsored retirement plan. In order to qualify for the saver’s credit, you must be at least 18 years old and not currently a full-time student. Furthermore, no one can be able to claim you as a dependent.
You might be able to save beyond the maximum
If you qualify to make last-minute IRA contributions, you will be able to sock away up to $5,500. What’s even better is that older taxpayers can save even more through catch-up provisions. If you were at least 50 years old at the end of last year, you can go beyond the maximum and contribute up to $1,000 more.
The IRS makes a special note that if you were at least 70½ years old by the end of last year, you will not be able to make contributions to a traditional IRA. That’s because you are subject to required minimum distribution rules.
Familiarize yourself with income phase-out rules
If you are a participant in your employer’s retirement plan, you will have to abide by phase-out rules for deductions for contributions to a traditional IRA. These phase-out levels change depending on your income level.
For example, if you are single or the head of your household, you will not be eligible to contribute to a traditional IRA If your modified adjusted gross income was more than $70,000 and you were covered by an employer-sponsored retirement plan during any time last year. When it comes to married couples filing jointly, the ceiling is much higher. The income phase-out ranges anywhere from $181,000 to $191,000.
The Roth IRA also has phase-out ranges. Married couples filing a joint return cannot contribute if the modified adjusted gross income is above $191,000, which is the same as the phase-out for a traditional IRA. Single and head of household filers are subject to a ceiling of $129,000.