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IRA contribution, and possible tax deduction, time

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Photo by 401k2012 via Flickr CC

April 18 isn't just the day you must file your 2021 tax return and pay any tax due. This fast-approaching Tax Day also the deadline to make a 2021 tax year contribution to your individual retirement arrangement (IRA), either a traditional or Roth account.

For 2021, you can contribute up to $6,000 to your traditional or Roth IRA. If you're age 50 or older, you can add another $1,000 as a catch-up contribution.

If you have the cash, or expect to get a refund that could replace the money you use for your IRA, it's a good idea. Maxing out your retirement contributions every year will give you a larger nest egg that will have more time to grow. And that helps ensure you get to enjoy your post-work years.

Future tax break: Roth IRAs are the favorite option of many savers. Taxed money goes into the account, which mean you can pull out those contributions whenever you want.

But the account's earnings also are tax free if you leave them alone for at least five years and are at least 59½-years-old.

By opening a Roth IRA when you're young, and then contributing the maximum allowable amount every year, you'll have decades of compounded earnings that will be out of the IRS' reach when you retire.

Just make sure you can contribute. If you make what tax law has deemed too much, you can't open or put money into a Roth IRA.

The good news is that the earnings' limits are pretty high, and they're adjusted annually for inflation.

For the 2021 tax year contributions that are still available until April 18, the amount you can put into a Roth IRA is reduced if your income is $125,000 to $140,000 and you are a single taxpayer or head of household filer. The income range is $198,000 to $208,000 for married couples filing jointly.

Once your income exceeds the maximum amount for your filing status, you cannot contribute to a Roth IRA.

Current tax break: Some folks, however, opt for the traditional IRA.

With the original traditional retirement account, contributions are tax-deferred, meaning the U.S. Treasury doesn't get it's cut until you take money out, again on your 59½ birthday or later.

These folks are counting on being in a lower tax bracket when they start taking out traditional IRA money.

They also are looking at getting a tax break now. Some or all of your traditional IRA contributions could be deductible in the tax year you make it. Even better, you don't have to itemize to claim this tax break, which is one of the more than two dozen so-called above-the-line deductions.

But if you're hoping to get this IRA deduction on the traditional account contribution you make by April 18, be sure you qualify. Your tax break could be limited depending on your income, marital status, and whether you (and your spouse, if applicable) have workplace retirement plans.

The table below shows how much you can make in 2021 (and 2022 if you've already maxed out last year's contribution and are working on this year's) before you hit the level where your traditional IRA contributions are reduced or are no longer deductible.


2022 phase-out range
based on MAGI*

2021 phase-out range
based on MAGI*

Singles and
Heads of Households

who are covered at work by a retirement plan

$68,000 to $78,000

$66,000 to $76,000 

Married couples
filing jointly 
and the spouse making the contribution is covered by a workplace retirement plan

$109,000 to $129,000

$105,000 to $125,000

Married couples
filing jointly
and the contributing spouse has no workplace plan, but his/her spouse is offered a workplace retirement plan

$204,000 to $214,000

$198,000 and $208,000

Married individual
filing a separate return
and is covered by a workplace retirement plan**

$0 to $10,000

$0 to $10,000

*MAGI is modified adjusted gross income. (Shameless plug: The ol' blog's glossary has more on MAGI, as well as the previously mentioned individual retirement arrangement/account and lots of other tax terms.)
**There is no annual inflation adjustment in married filing separately situations.


Saver's Credit possible, too: Finally, if you contribute to a traditional or Roth IRA, or to a variety of other IRS-authorized retirement accounts, you also might able to claim the Saver's Credit.

This retirement tax break, also sometimes referred to as the Retirement Saver's or Retirement Savings Credit for more specificity, first appeared on 2002 tax returns. But it is too often overlooked.

In its current form, the Saver's Credit offers a bonus tax break for individuals who contribute to variety of already tax-favored retirement vehicles. These include, in addition to Roth and traditional IRAs, 401(k), 403(b) and other qualified employer plans (including the federal Thrift Savings Plan, or TSP); self-employed retirement accounts, including SEP (simplified employee pension) and SIMPLE (Savings Incentive Match Plan for Employees) IRAs; and Achieving a Better Life Experience (ABLE) accounts.

Eligible taxpayers who put up to $2,000 into qualifying retirement accounts could get up to a $1,000 tax credit. That's one grand that is a dollar-for-dollar offset of any tax you owe.

The Saver's Credit is designed to help lower-income earners who might not be so willing or able to take money from day-to-day needs. So this tax break is not available if you make more than the earnings limit for your filing status.

For 2021 tax year purposes, the Saver's Credit maximum earnings are:

  • $33,000 for singles and married filing separately taxpayers;
  • $49,500 for heads of household, and
  • $66,000 for married couples filing jointly.

While $1,000 is the maximum credit, it also is reduced if your income falls within certain adjusted gross income (AGI) brackets for your filing status. The table below shows the percentage calculation amounts for the Saver's Credit for the 2021 tax year:

Saver's Credit

Married Filing Jointly

Head of Household

married filing separately, or qualifying widow/er

50% of your contribution

AGI not more than $39,500

AGI not more than $29,625

AGI not more than $19,750

20% of your contribution

$39,501 - $43,000

$29,626 - $32,250

$19,751 - $21,500

10% of your contribution

$43,001 - $66,000

$32,251 - $49,500

$21,501 - $33,000

0% of your contribution

more than $66,000

more than $49,500

more than $33,000


If you can contribute to a retirement account by April 18, do, especially if that money shaves a bit off your 2021 tax bill.

And even if you don't get a tax break on your current return, you'll be boosting your chances of achieving the Golden Years you want.

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