Kevin M. Hedley

 

Hedley & Company

1593 Route 9, Clifton Park, NY 12065

 

Phone:  518-348-2079

Fax:      518-348-1264

 

Email: accounting@hedleycpa.com

February 2019

Lighten Your Tax Load and Save More

Orange cartoon character with a big text tax.

Need to save more for retirement? Both traditional and Roth IRAs can help you get there, and both offer tax advantages. Better yet, you have until your tax filing deadline to contribute to a traditional IRA and have it count as a potential deductible contribution for tax year 2018.


BY THE NUMBERS
You may make contributions of up to $5,500 annually, plus another $1,000 if you’re at least age 50, to a traditional IRA for 2018. The limit increased to $6,000 in 2019.


Contributions are tax-deductible for tax year 2019 provided:


  • Your spouse has a workplace retirement plan and you don’t, with the deduction phasing out when taxable income is between $193,000 and $203,000; the range was between $189,000 and $199,000 last year;

  • You're married and file your tax jointly, and you have a workplace plan, the deduction disappears between $103,000 and $123,000 in 2019, up from $101,000 and 121,000;

  • You're single or a head of household, have a workplace plan and your income is between $64,000 and $74,000 in 2019, up from $63,000 and $73,000 in 2018;

  • You and a spouse don’t have a workplace plan, regardless of income.


TAX-ADVANTAGED
Even if you don’t qualify for deductible contributions, your account balance potentially grows tax-deferred until you take withdrawals. Whether you’re looking for your first retirement account or looking to put away more for the future, a traditional IRA may get you from here to there.


And speaking about tax advantages, a Roth IRA has a few of its own. It is basically the traditional IRA turned upside down, as contributions are not tax-deductible but qualified distributions are tax-free.


In tax year 2019, single taxpayers and heads of household can contribute fully to a Roth IRA if their taxable income is $122,000 or less. The deduction fully phases out at $137,000. Married couples filing jointly will see their ability to contribute phase out from $193,000 to $203,000.


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