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IRAs and Taxes. What’s New (or Unchanged) for 2017?

For many people, retirement accounts aren’t top-of-mind. You set up your contribution on day one at a new job or you open an account at your financial institution. You’re saving for your retirement. You did your part, but have you thought about it much since that day? While you may be contributing to your retirement, are you also taking advantage of potential tax savings? Each year the Internal Revenue Service evaluates the impact cost-of-living adjustments has on retirement plans and issues new guidance.

Highlights of 2017 changes
The income ranges for determining eligibility to make deductible contributions to Traditional Individual Retirement Accounts (IRAs) and Roth IRAs, and to claim the Saver’s Credit all increased for 2017.

For Traditional IRAs, use the following guidelines:

  • If you don’t have a retirement plan at work and you’re under 70 ½, you can deduct the entire amount from your taxes.
  • If you have a retirement plan at work, you may fully or partially deduct your contribution only if your modified adjusted gross income (MAGI) qualifies. For 2017, the deductions are phased out entirely for singles earning over $72,000, couples earning over $119,000 or married filing separately over $10,000.
  • If you’re not covered by a retirement plan at work, but your spouse is, you may qualify for a full or partial deduction if you file jointly and your MAGI is below $196,000 for the 2017 tax year.

For Roth IRAs, the contribution eligibility is phased out for singles and heads of household earning over $133,000 or for married couples filing jointly earning over $196,000.

For the Saver’s Credit for low- and moderate-income workers, the income limit is $62,000 for married couples filing jointly, $46,500 for heads of household, and $31,000 for singles and married individuals filing separately.

Unchanged limitations

  • For employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan, the contribution limit remains unchanged at $18,000.
  • For employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan, the catch-up contribution limit remains unchanged at $6,000.
  • The limit on annual contributions to an IRA remains unchanged at $5,500. For individuals aged 50 or over, the annual catch-up contribution is not subject to an annual cost-of-living adjustment and remains $1,000.

Don’t forget, you have until April 18, 2017 to contribute to your 2016 IRA!

Confused? Let an investment professional at Vantage Investment Services Group(ISG)* help you.

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For additional information about IRAs and retirement planning, visit Retirement Central.

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Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax. The ROTH IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of ROTH IRAs. Their tax treatment may change.

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