These Aren't Your Parents' Taxes (Part 4) — Individual Retirement Agreement (IRA) Deduction
The Top 10 Things for 18-25 Year-olds to Know About Taxes
5) Individual Retirement Agreement (IRA) Deduction
This is a double-whammy in a good way. You could save for your retirement AND reduce your taxes. How? Read on:
If your income is less than $26,500 you may get a retirement saver’s credit of up to $1000 for contributions to an IRA. The catch here is that you can’t be a full time student to get this credit.
If your income is under $63,000 and you’re eligible for a retirement plan with your job, you can make a contribution of up to $5000. However, if your income is $63,000 or more, you won’t get to deduct it. See http://turbotax.intuit.com/tax-tools/ and click on the IRA Calculator to figure out how much you can deduct on your tax return (not a shameless plug—just a freakin sweet tool).
A final word on IRAs: If you aren’t eligible for a retirement plan, it doesn’t matter how high your income is—you can contribute and deduct up to $5000. The nice thing about this is—deductions reduce your income. And deducting your income reduces the amount of taxes you have to pay. Not to mention the fact that having a retirement fund might work out better for you than working at a burger joint when you’re 80.
Stay tuned for my next installment. I’ll be talking about what paperwork you’ll want to have with you when you actually sit down to file.
Have product questions? We have your answers.
Hi Ted, I don’t know the answer to your question. Check out TurboTax’s Live Community and enter your question in the Retirement category under Preparing your return. Here’s the link
https://ttlc.intuit.com/app/full_page
Hello to Jennifer, As long as your father gross income (income before expenses) is less than $3,500 and you provide more than half of his total support for the year, yes you can take your father as a dependent. Check out IRS pub 501, page 20 for details on support.
http://www.irs.gov/pub/irs-pdf/p501.pdf
I am being asked to list excess Roth IRA contribution credit. I didn’t make any Roth contributions this year how do I fix this?
Your question is probably answered in the Dependent’s blog that was recently posted:
http://turbotaxblog.typepad.com/turbotax_blog/2009/02/can-i-claim-my-girlfriend-as-a-dependent-.html