Tax Tips – your IRA
IRAs have been growing in popularity, with the options to contribute to a traditional IRA and a Roth IRA becoming more and more abundant. You should know the difference between the two, and how they can impact your tax return.
You cannot contribute to a traditional IRA if you are over 70.5 years of age. You can contribute to a Roth IRA at any age.
Deadlines to Contribute
You are permitted to contribute to an IRA at any time. In order for it to count for that year, you must contribute by the original due date of that year’s tax return. So, all 2017 contributions have to be made by April 18, 2018. If you make any contributions in 2018, you should clarify with your broker which year you wish to apply the contribution to.
Impact on your Taxes
If you have a traditional IRA, you will not pay taxes when contributing – meaning the amount you contribute is subtracted from your pre-tax income that year. However, you will pay taxes on any distributions you take from it. It is recommended that you look at the IRS Publication 590-A. You may be able to deduct traditional IRA contributions from your tax return.
If you are making a contribution to a Roth IRA, you will do so with post-tax income. There are no deductions available for Roth contributions. However, qualified distributions from a Roth are tax-free. This means that you will not pay taxes on any withdrawals from your Roth IRA and that any earnings from the Roth are untaxed.
Question About your IRA?
If you have questions about how you IRA will impact your taxes this year, email the family-operated team at Sherbetjian. We would be happy to assist you with all of your tax needs this year.