Happy New Year! It's IRA time!

Now’s not too soon to be pulling together the information you’ll be needing for your 2011 return. And, while you’re at it, why not set up a system for keeping and sorting your receipts and the important data for your 2012 returns? It’ll save you time when April 15th 2013 rolls around and every year thereafter.

 

Now, down to our first post for the year - the wonderful world of IRA contributions. Remember, it’s not too late to make your IRA contribution for 2011. In fact, you have up until 4/17/12.  But, if you extend your tax return, you DON’T get an extension for this contribution, so don’t delay!

 

For this year, you can contribute $5,000 if you’re under 50 and $6,000 if you’re 50 or older.

 

If you’re covered by an employer-sponsored retirement plan, your ability to take a deduction for a contribution to a Traditional IRA may be limited:

-          If your adjusted gross income (AGI) exceeds $90,000 per year, Married Filing Jointly, or if Single or Head of Household, $56,000, then your deduction is limited.  By the time your Adjusted Gross Income reaches $110,000 (MFJ) / $66,000 (Single or HOH), it is totally disallowed.

-           If you’re filing Married Filing Separate and your AGI exceeds $10,000, you can’t deduct.

 

If your spouse (but not you) is covered by an employer-sponsored retirement plan, your ability to take a deduction for a contribution to a Traditional IRA may also be limited:

-          If your joint adjusted gross income (AGI) exceeds $169,000 per year, then your deduction is limited. By $179,000 (MFJ), it is disallowed.

-          If you’re filing Married Filing Separate and your AGI exceeds $10,000, you can’t deduct.

 

If your income exceeds these limits, all is not lost!  You can still contribute to the Traditional IRA, you just can't take a deduction for it.

 

On the other hand, you might consider a contribution to a Roth IRA.  Unfortunately, there are still adjusted gross income (AGI) limitations there, and they can prevent you from contributing altogether. Singles and Heads of Household may earn up $107,000 and Married Filing Jointly, $169,000. After those limits, the ability to contribute is limited.  By the time you get to $179,000 (MFJ) / $122,000 (Single or HOH), the contribution is completely disallowed.

 

If you like, you can mix and match your contributions within your $5,000 ($6,000 over 50) limit.  For instance, you could be $2,500 in to a Traditional IRA and $2,500 in to a Roth IRA.  

 

Are you self-employed?  There are several other retirement plan options available to you, but that's for another post for another day.  Give Moseley & Associates a shout if you have any questions!