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Did you know…? You can contribute to an IRA by April 15 and still claim it your 2018 tax return

Posted on April 8, 2019

CPAs at Teipen Selanders Poynter & Ayres want to be sure you know that it’s not too late to contribute to your IRA and still claim it on a 2018 tax return – right up to April 15th 2019.

IRAs, or Individual Retirement Accounts, were especially designed to enable employees and the self-employed to save for retirement. In fact, almost any taxpayers who work are eligible to start a traditional or Roth IRA — or add money to an existing account – right up until the tax return deadline,

What’s the difference between a traditional IRA and a Roth IRA?

Contributions to a traditional IRA are (usually) tax deductible. At the other end of the program (when you are retired or can no longer work), IRA distributions are generally taxable.

Contributions to a Roth IRA are not tax deductible, as you pay taxes on this money. However, qualified distributions (when you are retired or can no longer work), are tax-free.

Here is what you need to know before you file your taxes:

  • To count towards your 2018 tax return, contributions must be made by April 15, 2019 (April 17, 2019 for residents of Maine and Massachusetts).
  • Interestingly, taxpayers may legally file their return claiming a traditional IRA contribution before the contribution is actually made, as long as the contribution was made by the date of the return.
  • Generally, eligible taxpayers can contribute up to $5,500 to an IRA for 2018.
  • Those 50 years of age or older by the end of 2018, may increase this amount to $6,500.
  • Qualified contributions to one or more traditional IRAs are deductible up to the contribution limit or 100 percent of the taxpayer’s compensation, whichever is less.

What’s new this year:

For 2018, if a taxpayer is covered by a workplace retirement plan, the deduction for contributions to a traditional IRA is generally reduced depending on the taxpayer’s modified adjusted gross income.

Here is the 2018 IRA scale:

  • Single or head of household filers with income of $63,000 or less can take a full deduction up to the amount of their contribution limit.
  • For incomes more than $63,000 but less than $73,000, there is a partial deduction and if $73,000 or more there is no deduction.
  • Filers that are married filing jointly or a qualifying widow(er) with $101,000 or less of income, a full deduction up to the amount of the contribution limit is permitted.
  • Filers with more than $101,000 but less than $121,000 can claim a partial deduction and if their income is at least $121,000, no deduction is available.

Even though Roth IRA contributions are not tax deductible, the maximum permitted amount of these contributions begins to phase out for taxpayers whose modified adjusted gross income is above a certain level:

  • For filers who are married filing jointly or qualifying widow(er), that level is $189,000.
  • Single head of household or married filing separately (not living with their spouse at any time during the year), that level is $120,000.
  • Married but filing separately (and living with their spouse at any time during the year), any amount of modified AGI reduces their contribution limit.

In addition, low- and moderate-income taxpayers making these contributions may also qualify for the Saver’s Credit. Ask your TSPA CPA for specifics, and get answers to your questions about your particular situation.