2018 is long gone but there is still time to reduce your taxable income for last year.
Make a contribution to your IRA.
If you qualify, an IRA contribution can be a great way to reduce your 2018 taxes. You are allowed to contribute up to $5,500, or even more if you are an old-timer like me: $6,500 for people age 50 and over.
Plus, if you are married, you can double up the amount with a spousal IRA.
If you are not covered by a retirement plan at work, you can deduct the full amount of your contribution, regardless of how much money you make.
If you do have a retirement plan at work, there are restrictions and limitations to qualify for the full deduction. Here’s a table that summarizes these rules. They are confusing so feel free to shoot me an email with any questions.
2018 Traditional IRA deduction limits
| Filing Status | Modified adjusted gross income (MAGI) | Deduction Limit |
| Single individuals | ≤ $63,000 | Full deduction up to the amount of your contribution limit |
| > $63,000 but < $73,000 | Partial deduction | |
| ≥ $73,000 | No deduction | |
| Married (filing joint returns) | ≤ $101,000 | Full deduction up to the amount of your contribution limit |
| > $101,000 but < $121,000 | Partial deduction | |
| ≥ $121,000 | No deduction | |
| Married (filing separately) | Not eligible | Full deduction up to the amount of your contribution limit |
| < $10,000 | Partial deduction | |
| ≥ $10,000 | No deduction | |
| Non-active participant spouse (i.e., those with spouses who earn no income) | ≤ $189,000 | Full deduction up to the amount of your contribution limit |
| > $189,000 but < $199,000 | Partial deduction | |
| ≥ $199,000 | No deduction |
If you’re self-employed, you can sock away a lot more by opening up a Simplified Employee Pension (SEP) plan before filing your taxes. For 2018, you can contribute up to $55,000, depending on your income.
Let me know if you have any questions!
Joe Baker, CFP®
Baker Asset Management, LLC
joebaker@bakerassetmanagement.com
