Our New York CPA and NYC accounting firm reminds you that you can still contribute to an Individual Retirement Arrangement (IRA) and claim a 2017 tax deduction on this year’s return.
Anyone with an IRA may be eligible for a tax credit or deduction on their 2017 tax return if they make contributions by April 17, 2018.
An IRA is designed to enable employees and the self-employed to save for retirement. Most taxpayers who work are eligible to start a traditional or Roth IRA or add money to an existing account. Contributions to a traditional IRA are often tax deductible, but distributions are generally taxable. Contributions to a Roth IRA are not deductible, but qualified distributions are tax-free.
Some additional important notes to keep in mind include:
- To count the deduction on your 2017 tax return, contributions must be made by April 17, 2018. In addition, low- and moderate-income taxpayers making these contributions may also qualify for the Saver’s Credit.
- Generally, eligible taxpayers can contribute up to $5,500 to an IRA. For someone who was 50 years of age or older at the end of 2017, the limit is increased to $6,500.
- The same general contribution limit applies to both Roth and traditional IRAs. However, a Roth IRA contribution might be limited based on filing status and income. An individual can’t make regular contributions to a traditional IRA in the year they reach 70½ and older. However, they can still contribute to a Roth IRA and make rollover contributions to a Roth or traditional IRA regardless of age.
- If neither the taxpayer nor their spouse was covered for any part of the year by an employer retirement plan, they can take a deduction for total contributions to one or more traditional IRAs up to the contribution limit or 100 percent of the taxpayer’s compensation, whichever is less.
For 2017, if a taxpayer is covered by a workplace retirement plan, the deduction for contributions to a traditional IRA is generally reduced if the taxpayer’s modified adjusted gross income is between:
- $0 and $10,000; married filing separately
- $62,000 and $72,000; single and head of household
- $99,000 to $119,000; married filing jointly or a qualifying widow(er)
- $186,000 to $196,000; married filing jointly where the IRA contributor is not covered by a workplace retirement plan but is married to someone who is covered
Even though contributions to Roth IRAs are not tax deductible, the maximum permitted amount of these contributions is phased out for taxpayers whose modified adjusted gross income is above a certain level:
- $0 to $10,000; married filing separately
- $118,000 to $133,000; single and head of household
- $186,000 to $196,000; married filing jointly
New York tax credits include the Retirement Savings Contributions Credit, or the Saver’s Credit as it is also known, is often available to IRA contributors whose adjusted gross income falls below certain levels. Eligible taxpayers get the credit even if they qualify for other retirement-related tax benefits. Like other tax credits, the Saver’s Credit can increase a taxpayer’s refund or reduce the taxes they owe.
The amount of this credit is based on several factors, including the amount contributed to either a Roth or traditional IRA and other qualifying retirement programs. For 2017, the income limit is:
- $31,000; single and married filing separate
- $46,500; head of household
- $62,000; married filing jointly.
For more information about filing taxes in New York City and taxes in New York State please contact our firm. For more details about the IRA tax deduction or the Saver’s Credit, visit IRS.gov.