James D. Lynch
Contribute to an IRA by April 15 to Claim it on 2018 Tax Returns
It’s not too late to contribute to an Individual Retirement Arrangement (IRA) and still claim it on a 2018 tax return. Anyone with a traditional IRA may be eligible for a tax credit or deduction on their 2018 tax return if they make contributions by April 15, 2019.
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 usually tax deductible, but distributions are generally taxable. While contributions to a Roth IRA are not tax deductible, qualified distributions are tax-free. 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 2018. For someone who was 50 years of age or older at the end of 2018, the limit is increased to $6,500. Qualified contributions to one or more traditional IRAs are deductible up to the contribution limit or 100 percent of the taxpayer’s compensation, whichever is less.
If a taxpayer is covered by a workplace retirement plan (such as a 401(k)), the deduction for contributions to a traditional IRA is generally reduced depending on the taxpayer’s modified adjusted gross income (and the income thresholds are relatively low). But the taxpayer can still deduct the 401(k) contributions. And the taxpayer can still make contributions to the IRA up to the contribution limits, even if the contributions are not deductible.