On Tuesday we looked at Louisville tax considerations to make when it comes to your 401(k). But did you know that you can also put money into an individual retirement account either a traditional IRA or a Roth account? Here’s what you need to know about each:
A traditional IRA might provide you a tax deduction for the year in which you contribute. A Roth isn’t deductible but when you take the money from this account in retirement you won’t owe any taxes. It grows tax free!
There are some changes in amounts related to IRAs for 2013.
You can contribute $500 more to both traditional and Roth IRAs next year. The limit for both types of accounts is $5500. The catch-up amount for older IRA owners however remains at $1000 in 2013.
You also can make a bit more money in 2013 and take advantage of an IRA.
If you have a workplace plan such as a pension or 401(k) the amount of a traditional IRA contribution you can deduct is limited by your adjusted gross income or AGI. In 2013 you still can claim at least a partial deduction if as a single or head-of-household filer your earnings are between $59000 and $69000. That means you can make $1000 more than last year and still get some tax deduction for your traditional IRA contribution.
Married couples filing jointly where the spouse who makes the IRA contribution is covered by a workplace retirement plan don’t see the deduction phase out until their joint AGI is in the $95000 to $115000 range. That’s $3000 more than in 2012.
If the married IRA contributor is not covered by a workplace retirement plan but his or her spouse does have a 401(k) the IRA deduction is phased out if the couple’s income is between $178000 and $188000. That’s $5000 more than in 2012.
As for Roth IRAs you can’t contribute to this type of retirement plan if you make more than a certain amount. Those levels are increased for 2013.
The phase-out range for taxpayers making contributions to a Roth IRA is $178000 to $188000 for married couples filing jointly a $5000 increase from 2012 limits. For singles and heads of household the income phase-out range is $112000 to $127000; that’s $2000 more than in 2012.