The deadline to file personal tax returns is fast approaching and that means so too is the deadline to stash away money in certain tax-advantaged retirement and savings accounts if you want to have those contributions count as 2016 contributions. The tax filing deadline this year is Tuesday, April 18. Here’s a look at some accounts that you can make final contributions to by tax day.
Health Savings Accounts (HSAs)
A health savings account is a tax-exempt account that allows individuals and families with high-deductible health plans to pay for qualifying medical expenses. Contributions to HSA accounts are tax deductible and earnings in HSA accounts grow tax-free.
For 2016, the IRS limited HSA contributions to $3,350 for individuals, and to $6,750 for families. HSA holders 55 and older get to save an extra $1,000 which means $4,350 for an individual and $7,750 for a family. Would-be HSA account holders have until the tax filing deadline to open and fund an account and have it apply to the 2016 tax year.
To learn more about health savings accounts, check out this IRS Publication 969 on HSAs.
Individual Retirement Accounts (IRAs)
Individual retirement accounts allow workers to make tax-advantaged contributions to save for retirement. For 2016, anyone under the age of 50 can contribute up to $5,500 to IRA accounts per year — that’s total, even if you have both a Roth IRA and traditional IRA account. Those aged 50 or older may contribute up to $6,500. But people of all ages face a second ceiling: contributions can’t exceed your taxable income.
Also, for 2016, individuals can only contribute to a Roth IRA if they make less than $117,000 if they are single, or less than $184,000 if married and filing jointly. If you make more than that, the amount you can contribute begins to phase out, with single people ineligible for a Roth IRA when their income exceeds $132,000 and married couples filing jointly ineligible when their income exceeds $194,000.
The IRA deduction limits can be tricky too. Roth IRA contributions are all after-tax (not deductible). The deduction allowed for traditional IRA contributions depend on whether or not you or your spouse are covered by a retirement plan at work. If neither of you are covered by a retirement plan at work, then the traditional IRA contribution is deductible. If either of you are covered by a retirement plan at work, then the portion of the traditional IRA contribution that is deductible depends on your income.
To learn more about IRA deduction and contribution limits, go to the IRS website https://www.irs.gov/retirement-plans/ira-deduction-limits.
We hope this information is helpful as you prepare for the approaching tax deadline. Please understand that this information isn’t intended to be a substitute for individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor. That said, we are strategically aligned with Crest Tax Pros and have access to a professional team of CPAs to support you in your tax preparation efforts if needed. Please let us know if we can be of assistance.
This information is not intended to be a substitute for specific individualized tax advice. Tax laws and provisions are subject to change. You are under no obligation to use the services of Crest Tax Pros, and may choose any qualified professional to provide tax services. Crest Tax Pros and their services are not affiliated with LPL Financial or Virtus Wealth Management.