Reminder: You Have Until Tomorrow to Lower Your Tax Bill With IRA Contributions
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Tax procrastinators, here’s one last friendly reminder for the tax season. If you have an Individual Retirement Account and you want a lower tax bill, you have until tomorrow, April 18th, to stash money in your traditional IRA.
If you have a traditional IRA (as opposed to a Roth), you can deduct your contributions from your taxable income for the year. The IRS gives you until Tax Day to make deductible contributions to an IRA for the previous year. Since that day falls on April 18, 2017 this year, you have until tomorrow to save that money. It’s not an option everyone can afford, of course, but if you’ve been meaning to sock away a little for retirement anyway, it’s worth considering.
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This is assuming you haven’t already reached your contribution limits for 2016. In general, the limits for 2015, 2016, and 2017 cannot be more than:
$5,500 ($6,500 if you’re age 50 or older), or
your taxable compensation for the year, if your compensation was less than this dollar limit.
It also assumes you’re eligible. There are certain income limits for deducting contributions and, should you hit those limits, your tax-deferred benefit will be phased out or gone completely. Check out those income limits here, but in general, you get no deduction if:
You’re married filing jointly and your modified adjusted gross income is $118,000 or more.
You’re single and your modified adjusted gross income is $71,000 or more.
Of course, we’re down to the wire now, and this would be a very last-minute deduction. And if you transfer money from a bank account, it could take a couple of days, so call your financial firm to ensure your contribution will indeed apply. I chatted with Fidelity and they told me as long as the transfer is initiated by the cutoff time tomorrow, which is 11:59 p.m. EST, it will count toward 2016. You can also send a check postmarked by April 18, 2017, and that will count, too, just make sure it’s noted on the check that it’s for a 2016 contribution.
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Contributing writer, Lifehacker.com
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