You Can Still Contribute to an IRA to Save on Taxes for 2017
If you haven’t filed your 2017 tax return yet, you still have time to save money by making a contribution to your IRA.
This is how it works. The money you contribute to your traditional IRA – $ 5,500 per year or $ 6,500 if you’re over 50 – is tax-free. If you have not reached the 2017 limit, you can pay by April 17 to receive a small tax credit. You do not need to list to benefit from the deduction.
You’ll want to point out that the money you put into your IRA is for 2017, not 2018, and if you don’t have an IRA yet, you’ll want to open one sooner rather than later – let’s say before this weekend. to ensure that you actually receive the deduction. (If you are self-employed, SEP IRAs are the best option.) Important point: This only applies to traditional IRAs, not Roth .
If you have a retirement plan at work – 401 (k), 403 (b), pension, or your employer contributed to your IRA – your revised AGI will affect whether you receive full, partial, or zero deduction. Here is a chart showing the income requirements for 2017 . If you are not covered by a retirement plan, there are no income restrictions or much more generous. You can view the 2017 requirements here .
Backdoor Roth and Guardian Credit
If you make too much money for tax deductions, you can make a non-deductible contribution and then convert it to Roth for potential future savings, known as Backdoor Roth.
“If you convert a traditional IRA – money that you have already earned an income tax deduction – into a Roth IRA, you will have to pay taxes on the entire amount converted,” writes RothIRA.com . But if you make a non-deductible contribution, “you can take this after-tax Traditional IRA money and convert it to a Roth IRA without another tax account, because you have already paid tax.” Then it grows tax-free. Another bonus: you can roll over as much money as you want (well, as much as you have in your IRA) to hell with the $ 5,500 annual cap. Remember to file IRS Form 8606 with your tax return when you make non-deductible contributions.
One word of warning: A GOP tax bill made it impossible to convert your account back to a traditional IRA (known as retraining).
And if you are a low income person, there is one more thing to consider is the depositor loan. According to US News :
Those with an adjusted gross income of up to $ 31,000 as an individual, $ 46,500 as a head of household, or $ 62,000 as a married couple in 2017, who are saving in a retirement account and not full-time, or declared as dependents others tax returns are eligible for a discount. The loan is 10, 20, or 50 percent of your retirement account contributions up to $ 2,000 for individuals and $ 4,000 for couples, with lower income people getting larger loans.
This essentially allows you to double your deduction. You can read more about this here and here .
And if you’ve already applied and haven’t claimed an IRA deduction, don’t worry. You can file a revised tax return using this form .