For the most part, any deductions you planned to use towards your 2017 taxes needed to be made by December 31 of last year. That time has passed and 2018 is now here.

Did you know there is still one last minute tax move you can make right up until “Tax Day” (April 17 this year thanks Donation Receiptto the 15th falling on a Sunday and then Monday the 16th being Emancipation Day, a federally observed holiday in Washington DC)?

Regardless of income, EVERYONE can contribute to a traditional IRA up to the annual contribution limit. The max contribution limit for individuals for the 2017 tax year is $5,500 each. If you’re over the age of 50, you can contribute an extra $1,000 making your limit $6,500 (known as a “catch-up” provision). However, the ability to use that contribution as a tax deduction is restricted by income. Here are the details.

Keep in mind, to be eligible to contribute to an IRA, you need to have earned income. This means wages, tips, business income, etc. Passive income (like investment income) does NOT count! The deduction you qualify for is the lesser of your earned income or the contribution limits listed above (taking into account the following income restrictions).

If you or your spouse (if you’re married) are NOT eligible to participate in an employer-sponsored retirement plan (401K, pension plan, etc.), your deductions aren’t income restricted. You can deduct your entire contribution.

If you or your spouse participates in an employer-sponsored retirement plan (401K, pension plan, etc.), income limits will determine just how much of that IRA contribution can count towards a deduction. If you happen to fall between the “full deduction limit” and the “phase-out limit”, you qualify for a partial deduction. Above the “phase-out limit”? Sorry, but you aren’t eligible for any sort of deduction for your IRA contribution. Take comfort in the fact that you are responsibly planning for your future.

Filing Status Full Deduction AGI Limit Phase-Out Limit
Single/Head of Household $61,000 $71,000
Married Jointly (you participate in employer-sponsored plan) $98,000 $118,000
Married Separately $0 $10,000
Married Jointly (spouse has employer-sponsored plan) $184,000 $194,000

 

If you have questions on contribution limits or are interested in the potential savings of contributing to a Traditional IRA, you’ve come to the right place! Not only is Wealth Builders an expert on all things taxes, we are your one stop shop for ALL things financial! We offer investment services as well! Call us today for your free consultation! Don’t miss out on this extra tax deduction before you file your 2017 taxes!

Give our office a call to take advantage of our tax season promotional offer. Just to say “thanks”, existing Wealth Builders clients who refer a new client for tax season will receive a $25 prepaid VISA credit card for each new client referred. We have a treat for new clients, too! All new clients will receive $25 off their first filing fee. Give us a try and see why our clients stay with us each and every year. What do you have to lose, except for some of that tax liability?

Just a friendly reminder for those of you interested in our tax preparation services – make sure to have all tax documents and data to our office no later than March 31, 2017 to ensure that your taxes are filed by “Tax Day”, Tuesday, April 17, 2018. Appointments are booking quickly, so make sure to call to reserve yours today!

 

“2017-2018 Traditional IRA Contribution Limits.” Charles Schwab, www.schwab.com/public/schwab/investing/retirementandplanning/understandingiras/traditionalira/contributionlimits

Frankel, Matthew. “Here’s the 2018 Contribution Limit.” Motley Fool, 22 Oct. 2017, 8:18AM, www.fool.com/retirment/2017/10/22/heres -the-2018-ira-contribution-limit.aspx.