TAX TIP No. 68

When it comes to individual retirement accounts, you have several choices. All offer some tax savings. The big difference is when, exactly, you get those savings.

Dollar limits

Married couples filing jointly and who have no employer-provided plans can deduct up to $10,000 in contributions, $5,000 in separate IRAs for each partner.

The contribution limits are even better for workers age 50 or older. They can sock away an extra $1,000 each tax year, giving you a total of $6,000 for 2008.

If you've already maxed out your 2008 contributions and are planning your 2009 taxes, the contribution amounts are the same. Just be sure that if you put in 2009 money before April 15, you note on your deposit slip that it's for the 2009 tax year. You don't want to go through the hassle of correcting an excess contribution or worse, paying a penalty for your mistake. But there is one situation where more than the usual amount is allowed; more on this later.

Before the lure of lower taxes prompts you to open a traditional IRA, be aware that a $5,000 (or $6,000 if you're older) contribution won't automatically cut your tax bill by that much. Rather, at the bottom of Form 1040 or Form 1040A, you subtract your contribution amount from your income to come up with your adjusted gross income, and then you figure your tax bill. But the less taxable income you have, the smaller the check you have to send to the Internal Revenue Service.

OK, even though it's not a direct contribution-to-write-off situation, you've determined that a traditional IRA is a good move, but you don't have the money right now. No problem. Just because the tax year ended on Dec. 31, that doesn't mean your annual contribution opportunity stopped then, too.

The allowable contribution amounts can be deposited into your traditional IRA as late as the April 15 filing deadline and still count toward cutting your current tax bill. You even can file your return before you make your contribution.

Just be sure you actually put the money in your account by the April deadline. Remember, the financial institution that manages your IRA sends account activity information to Uncle Sam, as well as to you.

Income limits

If you or your spouse has a retirement account at work, including a 401(k) plan option, a Keogh or SEP-IRA for self-employment income, you might not be able to take the full tax break of a traditional IRA. But all immediate tax savings may not be lost. Some of your traditional IRA contribution still might be deductible, as long as your income falls below IRS limits.

For 2008 returns, a single or head-of-household filer with a company-provided pension plan can earn up to $63,000 and still get a partial IRA deduction. The earnings cap is $105,000 for joint filers where each partner has a company retirement plan. If you don't have a company plan but your spouse does, the modified adjusted gross income limit before you lose your full deduction is even higher -- $169,000.

The work sheet in the Form 1040 instructions, or 1040A booklet if you file that form, will help you figure out how much of your contribution you can deduct.