Many Texas residents strive to set aside at least some money each year for future purposes, including retirement. If you contribute to an individual retirement account, you may wonder whether your contributions are tax deductible pursuant to applicable tax law. In simple terms, contributions to an IRA are legally deductible within certain parameters.
Basic guidelines regarding deductibility of IRA contributions
According to governing tax law as set forth in the Internal Revenue Code, IRA contributions generally are deductible up to $6,000 for the 2020 and 2021 tax years. You need to bear in mind that the level of deductible is subject to change in future tax years. If you are over the age of 50, the amount you can deduct for IRA contributions rises to $7,000.
Maximum deduction for all qualified retirement plans
If you have any additional qualified retirement plan beyond an IRA, the maximum deduction allowed in a tax year applies comprehensively to all of these accounts. In other words, you can deduct a total of $6,000 or $7,000 in contributions to your retirement accounts.
401(k) account at work exempted
If you have a 401(k) through your employer, contributions into that retirement plan do not impact your ability to take a tax deduction on IRA contributions. You can make maximum contributions to both types of plans and enjoy the associated tax deductions.
If you are like many Texans, you may benefit by consulting with a tax law attorney when mapping out your retirement options. An experienced attorney may aid you in taking appropriate advantage of deductions available to you under federal and state tax law.