Even though 2013 has come and gone, you can still get a tax break when you file your income tax return. How? By contributing to a Traditional IRA. If you’re self-employed, the same applies to your SEP-IRA or Keogh plan.
If you need help filing your taxes, you may qualify for free assistance from the Internal Revenue Service (IRS) or the AARP Foundation’s Tax-Aide program. Read on to learn how.
Tax Breaks on IRA Contributions
The IRS allows IRA holders to contribute to their accounts for the prior year up until April 15. If you have a Roth IRA, you won’t get a tax deduction. That’s because you contribute to a Roth IRA with after tax money. The tax benefit comes when you take your contributions and earnings tax-free in retirement.
If you own a Traditional IRA, your contributions are tax-deferred, up to a limit. You can make up to $5,500 in contributions for tax year 2013. If you are age 50 or over, you can contribute up to $6,500. If you haven’t met these limits, you have until April 15 to contribute and get a break on your 2013 income tax return.
You’re eligible for a full tax deduction for your Traditional IRA contributions if:
- You are not eligible to participate in a company-sponsored retirement plan, like a 401(k);
- Your adjusted gross income is $59,000 or less if you are single, or $95,000 or less for married couples filing jointly.
If you don’t have access to a company-based retirement plan but your spouse does, your Traditional IRA contribution is fully deductible if your joint income is $178,000 or less.
How much of a tax break you get depends on your tax bracket and how much you contribute. Let’s say you are in the 28% tax bracket. If you contribute $5,500 to your Traditional IRA, your tax deduction would be $1,540.
Tax Breaks for Self-Employed Plans
If you contribute to a SEP-IRA or Keogh, you can also contribute now for a 2013 tax break. In fact, if you file for an extension, you can contribute up until October 15, 2014. Generally, you can contribute the lesser of $51,000 or 25% of your earned income for the 2013 tax year.
Get Help if You Need It
The IRS offers free tax assistance through its Volunteer Income Tax Assistance (VITA) program. To be eligible, you generally need to make $52,000 or less. VITA sites are typically located at libraries, schools or other convenient locations. To find a VITA site in Vermont, you can look up locations using your zip code at irs.treasury.gov/freetaxprep.
The AARP Foundation’s Tax-Aide program also offers free tax assistance for low- and moderate-income earners, with a special focus on those aged 60 and over. Find a Tax Aide site in your community online at http://www.aarp.org/money/taxes/aarp_taxaide/.
For tax tips from AARP, visit http://www.aarp.org/money/taxes/irs-tax-tips/. You can get easy access to federal and state tax forms, find out about deductions you might not have heard of, and a whole lot more.