It’s IRA Season

This is the time of tax season where people may elect to open or contribute to an individual retirement account (IRA), traditional or Roth, to forgo paying extra taxes to Uncle Sam. Below are some details that may benefit you. You have until April 15th of the current year to make the contribution.

Per the IRS, below are the details:

How to set up an IRA

You can set up an IRA at a bank, with a stockbroker, or even by yourself online. If you are interested in aligning your values with investment Domini, “a mutual fund firm that’s women-led”, is a great place to start.

How much can you contribute?

Contributions to IRA’s are combined. If you opt for a Traditional IRA and a Roth IRA the combined limit will be $6,500 ($7,500 if age 50 or older). Married $13,000 ($14,000 if one spouse is age 50 or older. $15,000 if both spouses are age 50 or older)

Credit or Deduction?

You will receive a deduction for a traditional IRA which will reduce your adjusted gross income (AGI) but there are limits. Roth IRA’s do not qualify for a deduction in AGI. Both traditional and Roth IRA qualify for saver’s credit up to 50%, 20%,or 10% of an eligible contribution up to $2,000 max ($4,000 if married filing jointly), but it’s dependent on your AGI.

Restrictions:

If you are married and you or your spouse are covered by a retirement plan at work, your deduction may be limited. There is an income limitation too (See chart below)

Table 1. IRA Deduction Limits if Covered by a Retirement Plan at Work

Filing Status	And your Modified AGI* is:	Deduction
Single or Head of Household	$73,000 or less	A full deduction up to the amount of your limit contribution
	More than $73,000 but less than $83,000	A partial deduction
	$83,000 or more	No deduction
Married Filing Jointly or Qualifying Widow(er)	$116,00 or less	A full deduction up to the amount of your limit contribution
	More than $116,000 but less than $136,000	A partial deduction
	$136,000 or more	No deduction
Married Filing Separately	$10,00 or less	A partial deduction
	$10,000 or more	No deduction
*If you file separately and did not live with your spouse at any time during the year, your IRA deduction is determined under the “Single” filing status. Source: IRS.gov

Table 2: Amount of Roth IRA Contribution

Filing Status	And your Modified AGI* is:	Contribution
Married Filing Jointly or Qualifying Widow(er)	$218,000 or less	Up to the limit
	More than $218,000 but less than $228,000	A reduced amount
	$228,000 or more	Zero
Married Filing Separately (you lived with your spouse any time during the year)	$10,00 or less	A reduced amount
	$10,000 or more	Zero
Single, Head of Household, Married Filing Separately (you did NOT live with your spouse any time during the year)	$138,000 or less	Up to the limit
	More than $138,000 but less than $153,000	A reduced amount
	$153,000 or more	Zero
Source: IRS.gov

*Modified Adjusted Gross Income (MAGI):

Per Investopedia, here’s how to calculate MAGI

Note: MAGI does not include Supplemental Security Income (SSI)

Need to check your refund status?

Federal refund

• Call: (800) 829-1040
• Callers who are hard of hearing or deaf
  • TTY/TDD:  (800) 829-4059

NY State refund

• Call: (518) 457 5149
• Dial 711 for NY Relay Service

Mindful Reminder 

Don’t rush your return, as understanding tax laws can be difficult, but not impossible. Set aside a sufficient amount of time to study and review last year’s return. If you need help, visit the IRS website. Devise a method like a mindful check-in to regain balance and calmness when feeling anxious or stressed. Completing the return becomes much easier when you are relaxed.

Seeking Help

If you are depressed, anxious, or have panic attacks, find a health professional who can help you. 

Substance Abuse and Mental Health Services Administration (SAMHSA) National can provide free referrals. They are open 24/7, 365 days a year.

• Call: (800) 662-Help (4357). 
• Visit: SAMHSA’s National online treatment locator
• Text: Your zip code to 435748

If you are experiencing suicidal thoughts, please contact 988 for help. The calls are free, confidential, and they are open 24/7 to help you navigate difficult emotions. 

Attend a Workshop

If you are interested in attending a live webinar on improving your relationship with your finances, please visit my events.

Related Posts

Preparing for Tax Season	Family Tax Credits	Education Credits
Expenses for Business Use of your Home	Procrastination & Taxes	Saver’s Credit