And while time is running out, you can still contribute to an IRA for 2018.
Recent data from the Internal Revenue Service (IRS) indicates that the average refund this year is trending downward by as much as 17.0%. Trends, like just about everything, can always change, and it’s still early days for the IRS’ return data since the figure here was last updated before the final week of February.
But with March already well underway, time is running out for the April 15 deadline to file your federal returns. One of the deductions you can still take advantage of is making a regular contribution to a traditional IRA for 2018. You can deduct the contributions from your taxes if you qualify. You have until the federal deadline (but not including extensions) to do so.
If you or a spouse were not covered under an employer-sponsored plan your deduction to an IRA is allowed in full. The contribution levels for 2018 were $5,500 and $6,500 if you were 50 or older as of December 31, 2018. Your deduction, though, may be limited or reduced entirely depending on your filing status and your modified adjusted gross income (MAGI) if you or your spouse is covered by a retirement plan at work.
Single filers can take the full deduction up to the contribution amount if MAGI is $63,000 or less, and $101,000 or less for married joint-filers and qualifying widow(er)s. For those married and filing separately, only a partial deduction is allowed if MAGI was below $10,000. The IRS does say an IRA deduction may be determined under the single filing status for those married who file separately and didn’t live with their spouse at any time during the year.
Looking Ahead
Last-minute planning isn’t the best option for a sound financial strategy in retirement. So, by all means, if there’s still time to make that IRA contribution and you qualify, let your tax specialist know about it.
Also, don’t skip the opportunity to maximize your overall tax picture. Take advantage of all the deductions available to you and consider, if you’re able, making the most of an employer-sponsored plan by contributing up to what the IRS allows. For 2019, the annual contribution levels for an IRA were bumped up to $6,000 and $7,000 if you’re 50 or older. If you’re enrolled in a tax-qualified, retirement plan through your job, you’re eligible to contribute up to $19,000 this year, up from $18,500 in 2018.
If you’ve already filed your taxes, got a refund or paid what you owed, consider planning now for next year to take advantage of what you discovered from your most recent return.
Let us know if you’re planning the sale of a major asset this year, like your home or an investment property. The chances are very good that this will impact your retirement plan and your taxes and we want to know about it. Also, keep us in mind if you’re still a year or a few years away from retiring but have built up a large balance in your 401(k) or other tax-qualified retirement plan. We can help you manage the impact of taxes you might face when you begin to withdraw that money during your retirement.
Don’t hesitate to call us with any questions or schedule a meeting to review your financial plan. We’re here to help!
