2016 IRA Savings Still Available Until April 18th!

Are you looking to save money on taxes for the 2016 tax year?  You still have time to contribute into an IRA!  The contribution must be made by April 18, 2017, and it will count for the 2016 tax year.  If you have already filed your taxes, you can file an amendment, Form 1040X, to take advantage of this incredible tax savings.

Tax Saver’s Credit

Low- and moderate-income workers can take steps now to save for retirement and earn a special tax credit in 2016.  Eligible workers still have time to make qualifying retirement contributions and get the saver’s credit on their 2016 tax return. People have until April 18, 2017, to set up a new individual retirement arrangement or add money to an existing IRA for 2016. However, elective deferrals (contributions) must be made by the end of the year to a 401(k) plan or similar workplace program, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, and the Thrift Savings Plan for federal employees.
The saver’s credit helps offset part of the first $2,000 workers voluntarily contribute to IRAs and to 401(k) plans and similar workplace retirement programs. Also known as the Retirement Savings Contributions Credit, the Saver’s Credit is available in addition to any other tax savings that apply.

Traditional IRA

A Traditional IRA is an Individual Retirement Account to which you can contribute pre-tax or after-tax dollars, giving you immediate tax benefits if your contributions are tax-deductible. With a Traditional IRA, your money can grow tax-deferred, but you’ll pay ordinary income tax on your withdrawals, and you must start taking distributions after age 70½. Unlike with a Roth IRA, there are no income limitations to open a Traditional IRA. It may be a good option for those who expect to be in the same or lower tax bracket in the future.

Roth IRA

A Roth IRA is an Individual Retirement Account to which you contribute after-tax dollars. While there are no current-year tax benefits, your contributions and earnings can grow tax-free, and you can withdraw them tax- and penalty-free after age 59½ and once the account has been open for five years. With a Roth IRA, there are no contribution age restrictions, nor do you have to take Required Minimum Distributions (RMDs).

A Roth IRA can be a good savings option for those who expect to be in a higher tax bracket in the future, making tax-free withdrawals even more advantageous. However, there are income limitations to open a Roth IRA, so not everyone will be eligible for this type of retirement account.

myRA

myRA (my Retirement Account) is a new way to start saving for your future developed by the United States Department of the Treasury. myRA is a Roth IRA that invests in a new United States Treasury retirement savings bond, which will not lose money. myRA was designed for people without access to employer-sponsored retirement savings plans and for people looking for a simple, safe, and affordable way to start saving for retirement. myRA accounts cost nothing to open, have no fees, and don’t require a minimum amount of savings.

Contribution Limits

You are limited by law how much you can contribute annually to IRAs, including your myRA account. For 2016, total annual contributions to all your IRAs combined cannot exceed $5,500 per year (or $6,500 per year if you are age 50 or older). Contribution limits are subject to an annual cost of living adjustment.


For questions on how to open an IRA, or to include your contributions and save money on your tax return, call or email us.