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Anthony J. Bardi
Registered Representative
Enrolled Agent, LTC# 454
Tax and Financial Solutions, Inc.
151 SE 223rd Avenue
Gresham, OR 97030
Phone: 503-666-7909
March/April 2020
Tax Benefits of a Traditional IRA
If you’re still looking for a tax deduction on your 2019 tax return, consider contributing to a traditional IRA.
How Much?
Traditional IRAs still occupy a large space in the retirement savings space. Here’s why: Like potential growth in a Roth IRA, a traditional IRA’s growth builds tax-deferred until withdrawal. Unlike a Roth IRA, its traditional cousin has taxable distributions.* And also unlike a Roth, the traditional IRA offers tax-deductible contributions for those people qualifying by income.Tax-deductible contributions help you later, because your account should grow over time, and now, because contributions are deductible from your taxable income in the tax year contributions are made. So, if you are in the 25% combined tax bracket (state and federal), this means a $5,000 annual contribution saves you $1,250 in taxes.
Who Qualifies?
Your income and tax filing status will determine if your contributions are tax deductible in tax year 2019.** If you are covered by a retirement plan at work and your tax filing status is single or head of household, you can make a tax-deductible contribution for 2019 of up to the limit of $6,000 if your modified adjusted gross income (MAGI) is $64,000 or less. Take a partial deduction if your MAGI is between $64,000 and $74,000.If you file jointly or are a qualified widower, the income limit for a full deduction is $103,000 or less. For a partial deduction, it’s between $103,000 and $123,000. Married taxpayers filing jointly have no income limits to qualify for tax-deductible contributions when neither has a workplace retirement plan. If your spouse has a workplace plan and you don’t, take a full deduction if your MAGI is $193,000 or less and a partial deduction between $193,000 and $203,000.
*Distributions from traditional IRAs and, if taken prior to reaching age 59 1/2, may be subject to an additional 10% IRS tax penalty.
**https://www.irs.gov/retirement-plans/2019-ira-deduction-limits-effect-of-modified-agi-on-deduction-if-you-are-covered-by-a-retirement-plan-at-work and https://www.irs.gov/retirement-plans/2019-ira-deduction-limits-effect-of-modified-agi-on-deduction-if-you-are-not-covered-by-a-retirement-plan-at-work
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Tax and Financial Solutions, Inc. and LTM Client Marketing are unrelated companies. This newsletter was created by LTM Client Marketing and was not written or created by the named financial professional and does not necessarily represent the views and opinions of Avantax Wealth Management® or its subsidiaries.
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