Looking to save for retirement and maybe even save on you 2021 taxes?
While you cannot contribute more to your employer sponsored retirement account after year end, you may be able to contribute to an Individual Retirement Account. The deadline to contribute to an IRA for 2021 is April 18, 2022. Depending on your adjusted gross income, you may be able to take a deduction for a portion of your contribution, even if you are offered a retirement plan at your employer. If only your spouse is covered by a retirement plan at work, the income limits are more generous.
While you cannot contribute more to your employer sponsored retirement account after year end, you may be able to contribute to an Individual Retirement Account. The deadline to contribute to an IRA for 2021 is April 18, 2022. Depending on your adjusted gross income, you may be able to take a deduction for a portion of your contribution, even if you are offered a retirement plan at your employer. If only your spouse is covered by a retirement plan at work, the income limits are more generous.
Deductible IRA contribution limits for 2021:
If you qualify, the maximum amount you may be able to contribute is $6,000 or $7,000 if 50 or older. Deductible contributions reduce your taxable income, and you will pay less tax now.
Did you know that if your adjusted gross income is under $66,000 for 2021 and you file a married filing joint return, you could qualify for a tax credit by making contributions to your retirement? It is true. Income levels are lower for other filing statuses. The Retirement Savings Contributions Credit, commonly referenced as the Saver’s Credit, offers a credit of up to 50% of your contribution to that qualified retirement plan (maximum credit of $2,000 for a couple filing jointly).
Prefer a Roth IRA? While not tax deductible, a Roth IRS contribution qualifies for the Saver’s Credit and may not be taxed when distributed during retirement.
Roth IRA contribution limits for 2021:
The self-employed at all income levels have additional retirement plan options available. The deadline for making these contributions could be as late as October 15, the extended due date of your tax return. Talk with your accountant or financial planner to learn which account may be best for your situation.
- Single taxpayer or Married Filing Joint (MFJ) with no workplace retirement plans: No income limits
- MFJ where both spouses are offered a workplace retirement plan: Income phases out between $105,000 - $125,000
- MFJ where one spouse is offered a workplace retirement plan: Income phases out between $198,000 - $208,000
- Married Filing Separately (MFS) with no workplace retirement plans: No income limits
- MFS where one spouse is offered a workplace retirement plan: Income phases out between $0 - $10,000
If you qualify, the maximum amount you may be able to contribute is $6,000 or $7,000 if 50 or older. Deductible contributions reduce your taxable income, and you will pay less tax now.
Did you know that if your adjusted gross income is under $66,000 for 2021 and you file a married filing joint return, you could qualify for a tax credit by making contributions to your retirement? It is true. Income levels are lower for other filing statuses. The Retirement Savings Contributions Credit, commonly referenced as the Saver’s Credit, offers a credit of up to 50% of your contribution to that qualified retirement plan (maximum credit of $2,000 for a couple filing jointly).
Prefer a Roth IRA? While not tax deductible, a Roth IRS contribution qualifies for the Saver’s Credit and may not be taxed when distributed during retirement.
Roth IRA contribution limits for 2021:
- Single taxpayer: a full contribution is eligible up to $125,000 of income with limited contributions up to $140,000
- MFJ - a full contribution is eligible up to $198,000 of income with limited contributions up to $208,000
- MFS – a partial contribution is eligible up to $10,000 of income
The self-employed at all income levels have additional retirement plan options available. The deadline for making these contributions could be as late as October 15, the extended due date of your tax return. Talk with your accountant or financial planner to learn which account may be best for your situation.
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