You still have time to make 2017 IRA contributions

<h2 style="text-align: left; color: #14a73c; font-size: 26px;"> You still have time to make 2017 IRA contributions </h2>Tax-advantaged retirement plans like Individual Retirement Accounts (IRAs) allow your money to grow tax-deferred — or, in the case of Roth accounts, tax-free. April 17, 2018, is the 2017 deadline for IRA contributions. Deductible contributions will lower your 2017 tax bill, but even nondeductible contributions can be beneficial.

Don’t lose the opportunity
The 2017 limit for full contributions to all IRAs is usually $5,500 (if you were age 50 or older on December 31, 2017, the limit is $6,500). However, unused limits cannot be carried over to enlarge contributions in the future.

Once the contribution deadline has passed, the opportunity to make tax-advantaged savings will be gone forever. So, if you want to raise your chances for tax-deferred or tax-free savings, you will want to use up as much of your yearly limit as possible.

Three types of contributions
If you have yet to max out your 2017 IRA contribution limit, think about making one of these kinds of contributions by April 17:

  1. Deductible traditional. With traditional IRAs, account growth is tax-deferred, and distributions are subject to income tax. If you and your spouse decide not to participate in an employer-sponsored plan like a 401(k), your contribution is fully deductible on your 2017 tax return. If one of you do take part in an employer-sponsored plan, your deduction is subject to a modified adjusted gross income (MAGI) phaseout:
  • For married taxpayers who wish to file jointly, the phaseout range is specific to each person individually based on whether he or she is a participant in an employer-sponsored plan:

o    For a spouse who participates: $99,000–$119,000.

o    For a spouse who doesn’t participate: $186,000–$196,000.

  • For single and head-of-household taxpayers participating in an employer-sponsored plan: $62,000–$72,000.

Taxpayers with MAGIs in the applicable range can give a partial contribution; those with MAGIs exceeding the appropriate range cannot provide any IRA contribution.

  1. Roth. Contributions are not deductible with Roth IRAs, though, qualified distributions — along with growth — are tax-free. However, your ability to contribute is subject to a MAGI-based phaseout:
  • For married taxpayers filing jointly: $186,000–$196,000.
  • For single and head-of-household taxpayers: $118,000–$133,000.

If your MAGI falls within the applicable range, you can make a partial contribution. However, you can’t make any contribution if it surpasses the top of the range.

  1. Nondeductible traditional. When your income is too high for you to fully benefit from a traditional, deductible, or a Roth contribution, you might profit from a nondeductible contribution to a traditional IRA. Your account is still able to grow tax-deferred, and when you take qualified distributions, you’ll only be taxed on the growth.

Otherwise, soon after contributing, you might be able to change the account to a Roth IRA with minimal tax liability.

Maximize your tax-advantaged savings
Traditional and Roth IRAs give a powerful way to save for retirement on a tax-advantaged basis.  To learn about making 2017 contributions and making the most of IRAs in 2018 and beyond, contact us.

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Ben R Shull CPA LLC provides clients with tax, transaction, and advisory services. The insights and quality services we deliver help lead our clients through the next generation of changes, and accelerate growth while reducing risk. CPA Katy, TX.