How opening an IRA now can reduce your taxable income from last year
As Tax Day nears, there’s an account you can open ahead of time to reduce your taxable income for 2018 that you may have heard of, an individual retirement account - or IRA.
Typically an IRA offers a more competitive interest rate than an average savings account. With a traditional IRA, you can still save some money this tax season.
“You can contribute to your IRA at any time, but to receive tax benefits for 2018, move funds prior to the due date of the return,” through the tax deadline of April 15, said Justin Horton with Collins Consulting, a TS Prosperity company. “The contribution will reduce* your taxable income.”
Horton said depending on a person’s tax bracket, they could save anywhere from 10 to 28 percent* on their taxes by opening this type of account. Additionally, starting a retirement account is a good idea in general.
The perk only applies to traditional IRAs. With a Roth IRA you are unable to take the contributions off your taxes. The benefit of a Roth IRA is once the money enters the IRA, it grows tax free until dispersal. It’s another great option as you save for retirement.
Horton noted that Collins Consulting is available to help clients with information on the tax benefits of opening an IRA, which would be done through a bank.
There are many different types of IRA accounts to choose from, including the traditional IRA and Roth IRA accounts. CD, CDtwo® and Money Market IRAs are options as well, and each has its perks. IRAs offered at financial institutions are federally insured up to a specific amount required by law.
At The Bank of Tioga, clients can set up a variety of IRAs, with no set up or maintenance fees. Per federal guidelines, some yearly contribution limits apply. The limit for 2018 is $5,500, with an extra $1,000 of “catch up” allowed for individuals 50 or older.
In 2019, the limit increases to $6,000, with the catch up amount remaining at $1,000, according to the Internal Revenue Service.
Stop by a Bank of Tioga location or call 701-664-3388 (Tioga) or 701-965-6633 (Crosby) to get more information on an IRA. With an individual retirement account from The Bank of Tioga you can view account balances 24/7 with online banking and the bank app. Even better, The Bank of Tioga does not charge any setup or maintenance fees on IRAs.
*Please consult a tax advisor for your specific tax benefits. These are general statements and results may vary. Collins Consulting is an affiliate of The Bank of Tioga. Learn more about Collins Consulting on their website.