The primary benefits of contributing to an individual retirement account (IRA) are the 澳洲幸运5官方开奖结果体彩网:tax deductions, the tax-deferred or tax-free growth on earnings, and if you are eligible, nonrefundable tax credits. To get﷽ the most out of contributing to your IRA, it’s important to understand what these benefits mean and the limitations placed on them.

Receiving a Tax Deduction

If you do not participate in an 澳洲幸运5官方开奖结果体彩网:employer-sponsored plan, such as a 401(k), a SEP IRA, a SIMPLE IRA, or another qualified plan, contributions to your 澳洲幸运5官方开奖结果体彩网:traditional IRA may be tax-deductible.

If you participate in any of these plans, you may be considered an active participant, and the deductibility of your contributions would be determined by your 澳洲幸运5官方开奖结果体彩网:modified adjusted gross income (MAGI) and your 澳洲幸运5官方开奖结果体彩网:tax-filing status—that is, whether yওou and your spouse file separately, you're married and file jointly, or you're a single filer𒀰.

If your traditional IRA contribution is not deductible, you may still make a nondeductible IRA contribution to it. Alternatively, you may contribute to a Roth IRA, provided your MAGI satisfies the Roth IRA eligibility limits. The table below details the limitඣs for tax years 2023 and 2024.

For the table above, the full contribution limit is $6,500 for 2023 and $7,000 for 2024. In addition, individuals 50 years old and older qualify for an additional $1,000 catch-up contribution. If your income falls between the ranges that allow only a partial contribution, you may use a special formula to determin🍃e that partial contribution. An IRA calculator will further help you determine if you’re eligible for an IRA.

Should you decide to make a nondeductible contribution to your traditional IRA, be sure to file IRS 澳洲幸运5官方开奖结果体彩网:Form 8606, which helps you and the IRS keep track of the nontaxable balance in your traditional IRAs, ensuring that you do not pay taxes on distributions that should be tax-free.

Splitting Your Contribution

Splitting your contribution between your traditional and Roth IRA may be beneficial in certain circumstances:

• If you are eligible for only a partial deduction on your traditional IRA. Instead of contributing the nondeductible amount to a traditional IRA, in which earnings grow tax-deferred, you can contribute the amount to a Roth IRA, in which earnings grow tax-free.
• If you are eligible for only a partial Roth IRA contribution. To maximize your contribution for the year, you can contribute the difference to your traditional IRA.

Your combined contributions to your Roth and traditional IRAs should not exceed the IRA contribution limit. Again, the limit for 2023 is $6,500 and $7,000 for 2024. For those who are 50 or older, an additional catch-up contribution of $1,000 is allowed.

Saver’s Credit

Make sure to find out if you are eligible for the IRS’s 澳洲幸运5官方开奖结果体彩网:saver’s credit. You qualify if youꦅ meet the following criteria:

• You're 18 years old or older
• You aren't claimed as a dependent on someone else's tax return
• You aren't a student

You may be eligible for a nonrefundable tax credit of up to 50% of your IRA contribution, not exceeding $1,000 ($2,000 if married filing jointly), depending on your 澳洲幸运5官方开奖结果体彩网:adjusted gross income (AGI). Below ar🔴e the 2023 and 2024 tax credits that are allowed fo𒁏r combinations of particular income ranges and tax-filing statuses:

This non-refundable tax credit is allowed in addition to any deduction you may receive for your IRA contribution. In order to claim the nonrefundable tax credit, you must file IRS 澳洲幸运5官方开奖结果体彩网:Form 8880, the most current version of ♐which is available on the .

The Bottom Line

As the earnings in your traditional IRA grow on a tax-deferred basis—and on a tax-free basis in your Roth IRA—you have plenty of reasons to 澳洲幸运5官方开奖结果体彩网:contribute to an IRA, along with the benefits discussed above. However, you may want to consult with a financial advisor to determine whether your savings should bꦯe direcౠted to other vehicles.

For instance, if you receive a 澳洲幸运5官方开奖结果体彩网:matching contribution in a 401(k) plan, it generally makes better financial sense to contribute the amount n🔯ece👍ssary to receive the maximum match—and then only contribute to an IRA if you can still afford to do so.