Tax season is upon us, but there’s still time to make a game plan. Contributions to your traditional IRA may be tax deductible.* What you may not know, though, is that you can make contributions, if eligible, to your traditional IRA during this year that can count toward the previous tax year. By doing so, you may be able to subtract your Traditional IRA contribution from your taxable income. This means you’ll either owe less in taxes or earn more from your refund –an all-around win!
Before you open an IRA or make contributions, consider the following to ensure a traditional IRA can help you this tax season.
- All 2016 IRA contributions must be made no later than April 18, 2017. Remember to tell your OCCU representative or any other financial institution that these contributions should be applied to 2016, rather than 2017.
- You need earned compensation to invest in a traditional IRA. Whether you’re self-employed, salaried or earning money through wages, you’ll need taxable compensation in order to contribute to your traditional IRA, according to the IRS.
- Contributions cannot exceed the IRS annual maximum. The annual maximum is $5,500 if you’re under the age of 50, or $6,500 if you’re age 50 or older.
- According to the IRS, IRA contributions must be reported on Form 1040A or 1040. If you’re also claiming Saver’s Credit to help reduce your taxes even more, you will need to also report your contributions under Form 8880.
- You must be below the age of 70 ½ years-old. In the year you reach this age, you will not be eligible to contribute to a traditional IRA.
If you’re considering opening an IRA, considers rates and fees, in addition to potential tax benefits. Shop around, and compare OCCU’s great rates with no administrative and maintenance fees. Learn more about traditional IRAs and contributions by visiting our Retirement Central or call 800.365.1111.
*Note: The above information is not intended as tax advice. Please consult your tax professional for tax information.