It's Not Too Late For A 2010 IRA Deduction

You may still be able to make contributions to an individual retirement arrangement (IRA) for tax year 2010 that can save you money this year. 

Traditional IRAs

You may still eligible to make deductible contributions to an IRA for tax year 2010 so long as the contributions are made before April 15, 2011.  (However, if you would like the deduction for NEXT year’s taxes, contributions made after January 1 and by April 15 can be so designated.)

Remember, a primary advantage to such retirement savings is that you are not taxed on the money currently – you pay income tax on regular IRA deductions only when the funds are received by you later on, most likely in your retirement years. But if you are under 70-1/2 by the end of 2010 you may still be able to make a deductible IRA contribution.

To get an IRA deduction, generally there must have been some sort of taxable income, such as wages, salaries, commissions, tips, self-employment income for you and/or your spouse.

If you are 50 or older, you may be able to contribute as much as $6,000 to an IRA.  In addition, even if your spouse did not earn any money during 2010, there may be a special Spousal IRA Deduction.

New “Saver’s Credit”

There is a newly-named provision called the “saver’s credit” which is a credit against taxes if you qualify.  It goes on Line 50 of the Form 1040 and is different from the IRA deduction.  The IRA deduction (from Line 32 of the Form 1040) has the effect of reducing the amount of your income that becomes the Adjusted Gross Income (AGI).  The Saver’s Credit would be in addition to an IRA deduction and actually reduces your tax.

First off, however, you must meet the Adjusted Gross Income tests: line 38 from your IRS Form 1040 must be less than $55,000 if you are filing jointly -- $27,750 for filing singly or $$41,625 for head of household. 

How to Proceed

Our ProTax preparers are especially trained to help you with calculating your IRA deductions and the Saver’s Credit. They will use IRS Form 8880 to determine whether you can qualify for this special tax credit.

But if you would like to get more information on your own, you can download a “PDF” version of the IRS Publication 590 “Individual Retirement Arrangement (IRAs)” and also the Form 8880 from www.irs.gov and click on “Forms and Publications.” You can also call 1-800-TAX-FORM (1-800-829-3676).

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