Tax Savings IRA?

[Marco]

Can someone school me on setting up an IRA for tax savings? I do have a workplace program which I contributed $10k to in 2015. My income is just less than the $118k threshold, and I paid $15k in federal withholdings. Can I still open up an IRA before April 15th to save on my tax bill? I am 50+ so I could have participated in the catch-up. Could I contribute $8k so that I meet the $18k max for 401k's?

 

[NgineER]

For the 2015 taxes you can only do the IRA, age 50+ can contribute $6,500.

Search google for open an Ira account and you will be guided through the process, you have to select contributions to the 2015 tax year.

Any 401(k) contributions need to be in by 12/31 to be considered for account for the current tax year. You could contribute $18,000+$5,500 in catch up contributions for the 2016 tax year.

 

[travelover]

If you have a retirement plan at work, you can contribute to an IRA but the contribution is not tax deductible at your $118,000 income level.

 

[NgineER]

I don't think that is true, it depends on your income level.

 

[hnzw_rui]

Any 401(k) contributions need to be in by 12/31 to be considered for account for the current tax year. You could contribute $18,000+$5,500 in catch up contributions for the 2016 tax year.

To clarify, that's:

2016 Regular Contributions
$18,000 401(k)/403(b)/etc
$5,500 IRA
$23,500 Total

2016 50+ Catch-up
$6,000 401(k)/403(b)/etc
$1,000 IRA
$7,000 Total

2016 Total for 50+
$24,000 401(k)/403(b)/etc
$6,500 IRA
$30,500 Total

The limits for 401(k)/403(b) and IRA are separate.

For traditional IRA, if you're covered by a workplace retirement plan and your income is greater than $70,000 (single) or $116,000 (married filing jointly), then your contributions are non-deductible.

Can someone school me on setting up an IRA for tax savings? I do have a workplace program which I contributed $10k to in 2015. My income is just less than the $118k threshold, and I paid $15k in federal withholdings. Can I still open up an IRA before April 15th to save on my tax bill? I am 50+ so I could have participated in the catch-up. Could I contribute $8k so that I meet the $18k max for 401k's?

Unfortunately, you can't contribute to your 2015 401k anymore and given your income level contributing to a traditional IRA will likely not reduce your tax burden.

On the upside, with your $10k 401k contribution, you're probably eligible to contribute the full $6,500 limit to a Roth IRA up to April 15, 2016 for calendar year 2015 for future tax free growth.

 

[Marco]

Thanks all for your assistance!