It is possible for you to claim an IRA deduction for the individual income tax return imposed by the federal government. This will be applicable to the amount you have contributed towards your IRA. Contributions like this can be made as late as the tax return’s first due date.
Dollar restrictions imposed on contributions to an individual retirement account
You can make contributions to both a traditional IRA and a Roth IRA account, or to either one of them. The total contributions made by you to either the Roth or traditional IRAs for this year should not surpass the lesser of the earned income for that year or annual maximum amount.
The maximum regular contribution for both 2014 and 2015 is fixed at $5,500. The maximum match up contribution for both those years is also restricted to $1,000. It is obvious that the total maximum contribution for both the years will be $6,500. In case of contributions due date, the 2015 instance is fixed on April 15, 2016.
Any individual below the age of 70.5 years can make regular contributions with earned income. It you wish to make catch-up contributions, you must be 50 years of age or older and have earned income.
Traditional IRAs and age requirement
You must be below 70.5 years of age in order to make contributions to Traditional IRA. There are no restrictions, however, for Roth IRAs. The IRS has clearly stated that contributors must have any kind of taxable compensation like wages, commissions, bonuses, salaries, tips or any net income from any kind of self-employment Other compensation categories as defined by the IRA also includes taxable alimony and distinct maintenance payments.
It is possible for you to contribute to both Roth or Traditional IRA at any time in the calendar year. You can contribute to IRA by first deadline for tax return sans extensions.
Claiming IRA deduction
To claim your IRA deduction, report the contribution directly to first page of the Form 1040 or the Form 1040A. There is no requirement to itemize this when reporting the deduction.
- Form 1040A for deduction in 2014, go to line 17
- Form 1040for deduction in 2015, go to line 32
Phased out IRA deduction
Contributions made to Traditional IRA could either be completely deductible or partially deductible. In a few cases, it could even be entirely non-deductible. This depends on whether you and your spouse, or either one of
you, have retirement plan through an employer. In case you already have a retirement plan at your workplace, then it is required to examine an income of a person to verify whether there will be limited IRA deductions or not. The list of work based retirement plans include pensions, 403(b) plans and 401(k) plans.
When calculating Traditional IRA deduction, a formula incorporating modified and adjusted gross income (AGI) is used.
The Modified AGI is simply the income sans IRA deduction, after the inclusion of any benefits of Social Security which are taxable. The list of modifications include exclusion related to interest from savings bonds and adoption assistance which is excluded from the income.