Making IRA Contributions

The IRS has 8 important tips for you about setting aside money for your retirement in an Individual Retirement Arrangement.

1. You must be under age 70 1/2 at the end of the tax year in order to contribute to a traditional IRA.

2. You must have taxable compensation to contribute to an IRA.

·         If you file a joint return, generally only one spouse needs to have taxable compensation.

3. You can contribute to your traditional IRA at any time during the year. 

4. For 2013, the most you can contribute to your IRA is the smaller of either your taxable compensation for the year or $5,500. If you were 50 or older at the end of 2013 the maximum amount increases to $6,500.

5. Generally, you will not pay income tax on the funds in your traditional IRA until you begin taking distributions from it.

6. You may be able to deduct some or all of your contributions to your traditional IRA.

7. You may also qualify for the Savers Credit, formally known as the Retirement Savings Contributions Credit. The credit can reduce your taxes up to $1,000 (up to $2,000 if filing jointly). Use Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the Saver’s Credit.

8. You must file either Form 1040A or Form 1040 to deduct your IRA contribution or to claim the Saver’s Credit.

from IRS Tax Tip 2013-50: