taxes

Traditional IRAs work fine for some filers

Income limits

Of course, for every rule that makes it easier to contribute to a traditional IRA, there are others that complicate the deduction process.

If you or your spouse has a retirement account at work, including a 401(k) plan option, a Keogh or simplified employee pension IRA, 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 2013 returns, a single or head-of-household filer with a company-provided pension plan can earn up to $69,000 and still get a partial IRA deduction. The earnings cap is $115,000 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 -- $188,000.

If you've already contributed for 2013 and want to put in money for the 2014 tax year, the contribution amounts, regular and catch-up, are the same. However, the income limits have been increased a bit for inflation. If you have a workplace retirement plan, as a single or head-of-household filer you can earn up to $70,000 and still get a partial IRA deduction. Joint filers face an earnings cap of $116,000 when each partner has a company retirement plan. If you don't have a company retirement plan but your spouse does, the modified adjusted gross income limit in 2014 for at least a partial deduction is $191,000.

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.

Other IRA considerations

Employer-sponsored retirement options aside, keep in mind that you might not be able to max out your IRA contribution at the annual limit.

You can contribute, and potentially deduct, only as much as you earn. If you make $3,800 this year, then that's the most you can put in any IRA.

And if you're 70 1/2 or older, you can't put any more money into your traditional IRA. In fact, that's the age when the IRS demands you start taking money out of your traditional, tax-deferred retirement account.

So is a traditional IRA right for you? Only a thorough examination of your overall financial and tax circumstances can tell. Do your homework and look at the earnings potential and tax savings -- now and in the future -- of each IRA type. You have until the April tax-filing deadline to decide which is best for you.

 

advertisement

Show Bankrate's community sharing policy
          Connect with us
MORTGAGE HOME EQUITY AUTO CDs CREDIT CARDS
Product Rate Change Last week
30 year fixed 4.12%  0.06 4.18%
15 year fixed 3.25%  0.04 3.21%
5/1 ARM 3.48%  0.16 3.32%
 
View Rates in your area Next
Product Rate Change Last week
30K FICO-based HELOC 4.30%  0.01 4.29%
50K FICO-based HELOC 4.06%  0.02 4.04%
100K FICO-based HELOC 3.91%  0.02 3.89%
 
View Rates in your area Next
Product Rate Change Last week
60 month used car loan 2.79% --0.00 2.79%
48 month used car loan 2.99% --0.00 2.99%
60 month new car loan 3.23%  0.01 3.24%
 
View Rates in your area Next
Product Rate Change Last week
1 Year CD 0.97% --0.00 0.97%
2 Year CD 1.18%  0.01 1.17%
5 Year CD 1.81%  0.05 1.76%
 
View Rates in your area Next
Product Rate Change Last week
Balance Transfer Cards 15.75% --0.00 15.75%
Cash Back Cards 16.45% --0.00 16.45%
Low Interest Cards 10.96% --0.00 10.96%
 
Next
advertisement
DAILY TAX TIP NEWSLETTER

Get expert advice during tax season on tax preparation and tips for cutting your tax bill.

advertisement

Connect with us