IR-2019-46, March 19, 2019
WASHINGTON — The Internal Revenue Service reminded taxpayers today that it’s not too late to contribute to an Individual Retirement Arrangement (IRA) and still claim it on a 2018 tax return. Anyone with a traditional IRA may be eligible for a tax credit or deduction on their 2018 tax return if they make contributions by April 15, 2019.
This news release is part of a series called the Tax Time Guide, a resource to help taxpayers file an accurate tax return. Additional help is available in Publication 17, Your Federal Income TaxPDF, and the tax reform information page.
An IRA is designed to enable employees and the self-employed to save for retirement. Most taxpayers who work are eligible to start a traditional or Roth IRA or add money to an existing account.
Contributions to a traditional IRA are usually tax deductible, and distributions are generally taxable. To count for a 2018 tax return, contributions must be made by April 15, 2019 (April 17, 2019 for residents of Maine and Massachusetts). Taxpayers can file their return claiming a traditional IRA contribution before the contribution is actually made. The contribution must then be made by the April due date of the return. While contributions to a Roth IRA are not tax deductible, qualified distributions are tax-free. In addition, low- and moderate-income taxpayers making these contributions may also qualify for the Saver’s Credit.
Generally, eligible taxpayers can contribute up to $5,500 to an IRA for 2018. For someone who was 50 years of age or older at the end of 2018, the limit is increased to $6,500.
Qualified contributions to one or more traditional IRAs are deductible up to the contribution limit or 100 percent of the taxpayer’s compensation, whichever is less.
For 2018, if a taxpayer is covered by a workplace retirement plan, the deduction for contributions to a traditional IRA is generally reduced depending on the taxpayer’s modified adjusted gross income:
Single or head of household filers with income of $63,000 or less can take a full deduction up to the amount of their contribution limit. For incomes more than $63,000 but less than $73,000, there is a partial deduction and if $73,000 or more there is no deduction.
Filers that are married filing jointly or a qualifying widow(er) with $101,000 or less of income, a full deduction up to the amount of the contribution limit is permitted. Filers with more than $101,000 but less than $121,000 can claim a partial deduction and if their income is at least $121,000, no deduction is available.
For joint filers, where the spouse making the IRA contribution is not covered by a workplace plan, but their spouse is covered, a full deduction is available if their modified AGI is $189,000 or less. There’s a partial deduction if their income is between $189,000 and $199,000 and no deduction if their income is $199,000 or more.
Filers who are married filing separately and have an income of less than $10,000 can claim a partial deduction. Iftheir income is at least $10,000, there is no deduction.
Worksheets are available in the Form 1040 InstructionsPDF or in Publication 590-A, Contributions to Individual Retirement ArrangementsPDF. The deduction is claimed on Form 1040, Schedule 1PDF. Nondeductible contributions to a traditional IRA are reported on Form 8606PDF.
Even though contributions to Roth IRAs are not tax deductible, the maximum permitted amount of these contributions begins to phase out for taxpayers whose modified adjusted gross income is above a certain level:
For filers who are married filing jointly or qualifying widow(er), that level is $189,000.
For those who file as single, head of household, or married filing separately and did not live with their spouse at any time during the year, that level is $120,000.
For filers who are married filing separately and lived with their spouse at any time during the year, any amount of modified AGI reduces their contribution limit.
The Saver’s Credit, also known as the Retirement Savings Contributions Credit, is often available to IRA contributors whose adjusted gross income falls below certain levels. In addition, beginning in 2018, designated beneficiaries may be eligible for a credit for contributions to their Achieving a Better Life Experience (ABLE) account. For 2018, the income limits are:
$31,500; single and married filing separate
$47,500; head of household
$63,000; married filing jointly
Taxpayers should use Form 8880, Credit for Qualified Retirement Savings ContributionsPDF, to claim the Saver’s Credit, and its instructions have details on figuring the credit correctly.
Taxpayers can find answers to questions, forms and instructions and easy-to-use tools online at IRS.gov. They can use these resources to get help when it’s needed, at home, at work or on the go.
More resources:
Publication 5307, Tax Reform Basics for Individuals and FamiliesPDF
Do I Qualify for the Retirement Savings Contributions Credit?