There’s still time to make your IRA contribution for the 2016 tax year

There’s still time to make your IRA contribution for the 2016 tax year

Did you contribute to an Individual Retirement Account last year? Are you thinking about contributing to your IRA now? If so, you may have questions about IRAs and your taxes. Here are some IRS tax tips about saving for retirement using an IRA:

• Age Rules. You must be under age 70½ at the end of the tax year in order to contribute to a traditional IRA. There is no age limit to contribute to a Roth IRA.

• Compensation Rules. You must have taxable compensation to contribute to an IRA. This includes income from wages and salaries and net self-employment income. It also includes tips, commissions, bonuses and alimony. If you are married and file a joint tax return, only one spouse needs to have compensation in most cases.

• When to Contribute. You can contribute to an IRA at any time during the year. To count for 2016, you must contribute by the due date of your tax return. This does not include extensions. This means most people must contribute by Tuesday, April 18, 2017. If you contribute between Jan. 1 and April 18, make sure your plan sponsor applies it to the year you choose (2016 or 2017).

• Contribution Limits. In general, the most you can contribute to your IRA for 2016 is the smaller of either your taxable compensation for the year or $5,500. If you were age 50 or older at the end of 2016, the maximum you can contribute increases to $6,500. If you contribute more than these limits, an additional tax will apply. The additional tax is six percent of the excess amount contributed that is in your account at the end of the year.

• Taxability Rules. You normally don’t pay income tax on funds in your traditional IRA until you start taking distributions from it. Qualified distributions from a Roth IRA are tax-free.

• Deductibility Rules. You may be able to deduct some or all of your contributions to your traditional IRA. See IRS Publication 590-A for more.

• Saver’s Credit. If you contribute to an IRA you may also qualify for the Saver’s Credit. It can reduce your taxes up to $2,000 if you file a joint return. Use Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the credit. You can file Form 1040A or 1040 to claim the Saver’s Credit.

• New myRA. If your employer does not offer a retirement plan, you may want to consider myRA. It is a new retirement savings plan offered by the U.S. Department of the Treasury. It’s safe and affordable. You can also direct deposit your entire refund or a portion of it into an existing myRA – Retirement Account.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on

Note: The opinions voiced in this material are for general information only and not intended to provide specific advice or recommendation for any individual. Please remember that past performance of investments may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this newsletter (article), will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this post serves as the receipt of, or as a substitute for, personalized investment advice from Vermillion Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed within this newsletter to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. A copy of our current written disclosure statement discussing our advisory services and fees is available for review upon request.

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