Have you made your IRA Contribution for Tax Year 2011?
If you haven’t already funded your retirement account for 2011, do so by April 17, 2012. That’s the deadline for contributions to a traditional IRA, deductible or not, and to a Roth IRA. However, if you have a Keogh or SEP and you get a filing extension to October 15, 2012, you can wait until then to put 2011 contributions into those accounts. To start tax-free compounding as quickly as possible, however, don’t dawdle in making contributions.
Making a deductible contribution will help you lower your tax bill this year. Plus, your contributions will compound tax-deferred. To qualify for the full annual IRA deduction in 2011, you must either: 1) not be eligible to participate in a company retirement plan, or 2) if you are eligible, you must have adjusted gross income of $56,000 or less for singles, or $89,000 or less for married couples filing jointly. If you are not eligible for a company plan but your spouse is, your traditional IRA contribution is fully-deductible as long as your combined gross income does not exceed $167,000.
For 2011, the maximum IRA contribution you can make is $5,000 ($6,000 if you are age 50 or older by the end of the year). For self-employed persons, the maximum annual addition to SEPs and Keoghs for 2011 is $49,000.
Although choosing to contribute to a Roth IRA instead of a traditional IRA will not cut your 2011 tax bill—Roth contributions are not deductible—it could be the better choice because all withdrawals from a Roth can be tax-free in retirement. Withdrawals from a traditional IRA are fully taxable in retirement. To contribute the full $5,000 ($6,000 if you are age 50 or older by the end of 2011) to a Roth IRA, you must earn $105,000 or less a year if you are single or $167,000 if you’re married and file a joint return. Below are tables with this year’s limits:
Roth and Traditional IRA Contribution Limits (2006 to 2013)
This entry was posted by Mike on January 24, 2012 at 10:42 am, and is filed under News. Follow any responses to this post through RSS 2.0. Responses are currently closed, but you can trackback from your own site.