If you made IRA contributions or
you’re thinking of making them, you may have questions about IRAs and
your taxes. Here are some important tips from the IRS about saving for
retirement using an IRA.
1. You
must be under age 70 1/2 at the end of the tax year in order to
contribute to a traditional IRA. There is no age limit to contribute to a
Roth IRA.
2. You
must have taxable compensation to contribute to an IRA. This includes
income from wages and salaries and net self-employment income. It also
includes tips, commissions, bonuses and alimony. If you’re married and
file a joint return, generally only one spouse needs to have
compensation.
3. You
can contribute to an IRA at any time during the year. To count for
2013, you must make all contributions by the due date of your tax
return. This does not include extensions. That means you usually must
contribute by April 15, 2014. If you contribute between Jan. 1 and April
15, make sure your plan sponsor applies it to the right year.
4. In general, the most you can contribute
to your IRA for 2013 is the smaller of either your taxable compensation
for the year or $5,500. If you were age 50 or older at the end of 2013,
the maximum you can contribute increases to $6,500.
5. You
normally won’t pay income tax on funds in your traditional IRA until
you start taking distributions from it. Qualified distributions from a
Roth IRA are tax-free.
6. You may be able to deduct some or all of your contributions to your traditional IRA. Use the worksheets in the Form 1040A or Form 1040
instructions to figure the amount that you can deduct. You may claim
the deduction on either form. Unlike a traditional IRA, you can’t deduct
contributions to a Roth IRA.
7. If you contribute to an IRA you may also qualify for the Saver’s Credit. The credit can reduce your taxes up to $2,000 if you file a joint return. Use Form 8880,
Credit for Qualified Retirement Savings Contributions, to claim the
credit. You can file Form 1040A or 1040 to claim the Saver’s Credit.
8. See Publication 590, Individual Retirement Arrangements, for more about IRAs.
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