Review the 2013 IRA contribution and deduction limits to ensure you’re taking full advantage of the opportunity to save for retirement. You can contribute up to $5,500 or your taxable compensation, if less ($6,500 if you are age 50 or older by the end of 2013) to a traditional or Roth IRA. However, you may not be able to deduct your traditional IRA contributions if you or your spouse is covered by a retirement plan at work and your income is above a certain level. If you file a joint return, you and your spouse can each make IRA contributions even if only one of you has taxable compensation. You have until April 15, 2014, to make an IRA contribution for 2013.
- Excess contributions
If you’ve exceeded the 2013 IRA contribution limit, you should withdraw the excess contributions from your account by the due date of your 2013 tax return (including extensions). Otherwise, you must pay a 6% tax each year on the excess amounts remaining in your account.
You may be able to take a retirement savings contribution tax credit (saver’s credit) of up to $1,000 ($2,000 if filing jointly) for your contributions to either a traditional or Roth IRA. The amount of the credit you can get is based on the contributions you make and your credit rate. Your credit rate can be as low as 10% or as high as 50%. Your credit rate depends on your income and your filing status.