From our CPA office in St. Petersburg, FL – With tax rates potentially set to increase at year end and fewer tax breaks available, traditional Individual Retirement Accounts are a great way for taxpayers to lower their tax bill. And there is still time to make contributions to an IRA for 2012.
In 2012, contributions can be made to a traditional IRA of up to $5,000 ($6,000 for taxpayers 50 or older) or total taxable compensation, whichever is smaller. Taxpayers, and their spouses if married, that are not covered by a retirement plan at work can deduct the full amount of the contribution to a traditional IRA, lowering their tax bill. For taxpayers, or their spouse if married, who are covered by a retirement plan at work, the deduction may be limited based on their income level.
In 2012, IRA deductions will be limited for single or head of household filers with income (modified adjusted gross income or MAGI) above $58,000. Deductions for married filing jointly taxpayers with MAGI above $92,000 will be limited, and for taxpayers not covered by an employer retirement plan but their spouse is, IRA deductions will be limited for MAGI above $173,000.
Taxpayers can also make contributions to a Roth IRA. The total contribution to all IRAs, traditional and Roth, cannot exceed $5,000, $6,000 for taxpayers 50 and older, in 2012. Contributions to Roth IRAs are not deductible. Additionally, contributions to Roth IRAs are limited for single or head of household filers with MAGI of $110,000 or greater, and married filing jointly taxpayers with MAGI of $173,000 or greater.
If you have questions regarding tax benefits of IRAs or other retirement plans, call us today. As tax professionals, McAtee & Associates can help both individual and business taxpayers with all their tax matters.
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.
