June 2020 Question and Answer

Question:

I am filing taxes on July 15. Can I still contribute to my IRA?

Answer:

Yes, but your income and tax filing status will determine if your traditional IRA contributions are tax-deductible. For example, if you are covered by a retirement plan at work and your tax filing status is single or head of household, you can make a tax-deductible contribution of up to the limit of $6,000 if your modified adjusted gross income (MAGI) is $64,000 or less. Take a partial deduction if your MAGI is between $64,000 and $74,000.

If you file jointly or are a qualified widower, the income limit for a full deduction is $103,000. Married taxpayers filing jointly have no income limits to qualify for tax-deductible contributions when neither has a workplace retirement plan. If your spouse has a workplace plan and you don’t, take a full deduction if your MAGI is $193,000.

Question:

I was laid off because of COVID-19. Will I have to pay taxes on my unemployment benefits?

Answer:

Yes, unemployment benefits are generally taxed at federal ordinary income rates. Some states also count unemployment benefits as taxable income while others exempt it. You can opt to have 10% withheld from each payment. No other percentage or amount is allowed.