If you want to reduce your tax bill, you should know that income limits that determine who can deduct contributions to an individual retirement account (IRA) increased modestly in 2014.
The phaseouts apply only if you have a retirement savings plan at work, such as a 401(k). An eligible single or head-of-household filer can take a full IRA deduction if his/her modified adjusted gross income (AGI) is $60,000 or less, which is an increase from a cap of $59,000 in 2013. He/she can take a partial IRA deduction if his/her modified AGI is more than $60,000 but less than $70,000. A person who has a modified AGI of $70,000 or above can’t take a deduction. Previously, the deduction cutoff point was $69,000. (Modified AGI is AGI with certain deductions, such as for student-loan interest, added back in.)
For consumers who file a joint return, the full-IRA deduction cap is $96,000 and the modified-IRA deduction cutoff is $116,000. These also represent an increase of $1,000 each from 2013. If you’re married and don’t have a workplace savings plan but your spouse does, then your IRA deduction is limited at a modified AGI that’s above $181,000 and barred at $191,000. Those figures are up from $178,000 and $188,000, respectively.
The maximum IRA contribution in 2014 remains $5,500 ($6,500 if you’re 50 or older), and you have until April 15, 2015, to make a contribution for 2014.