The end of tax season is rapidly approaching and we want to give you some last minute information about how to reduce your taxable income. Taxable income is your gross income after you subtract all of the deductions that the IRS allows. One of these deductions is a contribution to a traditional Individual Retirement Account (IRA). Most taxpayers can contribute up to $5,500 dollars per year ($6,500 if you are 50 or older) and subtract that contribution from taxable income. If you are married and file a joint return, each spouse can contribute to his/her individual IRA if at least one of the spouses has earned income. This means a married couple can deduct a maximum of $11,000 per year from taxable income. IRA contributions can be made until the last day of tax season. For example:
SFC Snuffy and his wife Sarah are having their 2016 joint return prepared. They are both 35 years old. SFC Snuffy has a taxable income of $50,000. Sarah had no taxable income for 2016. SFC Snuffy and his wife Sarah may both contribute $5,500 to their IRAs for 2016. As long as they make this contribution before April 18, 2017, they can deduct $11,000 from their taxable income.
For more information, contact the Fort Irwin Tax Center 760-380-3604. For the IRS explanation of the credit, please visit: https://www.irs.gov/retirement-plans/individual-retirement-arrangements-iras-1. Tax season ends on April 18 and we strongly encourage the Fort Irwin community to take advantage of the services offered by the Tax Center.