If you owe taxes this year, an IRA is still the best way to defer taxes.
Your taxes may have increased for a number of reasons: capital gains, a two income family, a raise, sales commissions or a number of other reasons that put you in a high income bracket.
A good strategy is still to use a traditional IRA to defer part of your taxes. If you’re over 50, you can defer up to $6500 into a traditional IRA and an additional $6500 for your spouse. That’s a total of $13,000 off your taxable income for the year. You can defer $13,000 this year until later, and pay taxes on it when you’re making a lot less money. (Hmmm…I hope that never happens).
A Roth IRA is a great way to earn interest without increasing your tax bill. Either way, it’s worth giving some consideration. See current IRA limits at https://www.irs.gov/retirement-plans/ira-deduction-limits
Let’s review the current IRA limits
|Traditional IRA Contribution Limit||$5,500||$6000|
|Traditional IRA Contribution Limit if 50 or over||$6,500||$7000|
|If you’re covered by retirement at work:*|
|IRA Income Limits (AGI) – For single filers phase out starts at:||$63,000||$64,000|
|IRA Income Limits- For married filers phase out starts at:||$ 100,000||$103,000|
|Ineligible at:||$121,000||$123 See,000|
|*Your deduction is allowed in full if you (and your spouse, if you are married) aren’t covered by a retirement plan at work.|
|Roth IRA Contribution Limit||$5,500||$6,000|
|Roth IRA Contribution Limit if age 50 or over||$6,500||$7,000|
|Roth IRA Income Limits (AGI) – For single filesr phase out starts at:||$120,000||$122,000|
|Roth IRA Income Limits- For married filers phase out starts at:||$189000||$193.000|
Minimizing Your Tax Bill is an American Pastime.
Be sure to pay your fair share but, try not to overpay. Do your research or get advice from a good CPA. And remember, Utah Heritage Credit Unon has IRAs and their fees are very reasonable. It’s a good place to get started until you have enough money to justify the services of a good Financial Planner.
- You can take advantage of IRAs until the year your turn 70 1/2 as long as you have earned income.
- You can make a contribution for 2018 until April 15, 2018.
- For tax deferment. IRAs are as good as it get.