April 18th isn’t only the tax filing deadline this year, it’s also the deadline for contributing to your Traditional and/or Roth IRA for calendar year 2015. Yes that’s right you can still make a contribution for tax year 2015 and invest in these tax advantaged accounts. Unfortunately, there are bunch of pesky rules out there regarding IRA contributions. As with all tax related questions, please be sure to ask your accountant if you are eligible and then partner with your advisor to set a proper investment strategy.
Can I contribute?
Not everyone can.
If you or your spouse has qualifying earned income, then yes you can contribute up until you reach age 70 ½.
You will also need qualifying earned income here, but contribution eligibility is subject to a modified adjusted gross income (MAGI) phase out starting at $184,000 for couples filing joint tax returns and $117,000 for individual filers, however you can contribute beyond age 70 ½ as long as you still have income.
How much can I contribute?
You can contribute a maximum total of $5,500 per person across the IRAs that you are eligible for. If you were age 50 or older in 2015, you can bump that total up by an additional $1,000, for a total of $6,500 (called the catch-up provision).
Can I deduct my contribution?
This is the tricky part.
Contributions are never deductible.
Deductibility depends on whether or not you are covered (contributing) under your company retirement plan and your amount of earned income for the year.
- Married Neither Covered / Single Not Covered – Contributions are fully deductible
- Married Both Covered / Single Covered – Deductions are phased out beginning at a combined AGI of $98,000 for couples filing jointly and $61,000 for single filers.
- Married One Covered – Spousal deduction is phased out beginning at a combined AGI of $184,000.
In short, while you are busy agonizing over your tax bill, be sure you take advantage of the opportunity to set some capital aside for yourself.
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