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IS 2003 OVER? MAYBE NOT!

March 17, 2004

The calendar shows that that 78 days have passed since 2003, and 28 days remain to get your taxes done. When it comes to tax planning, 2003 is over.

Or not.

Even though there the calendar shows that 2003 is over, some folks still can cut their 2003 taxes.

IRA CONTRIBUTIONS

For those taxpayers who qualify, there is still time to make a deductible IRA contribution for 2003. The deadline for this is April 15 at midnight. For qualifying taxpayers the maximum deduction is $3,000 ($6,000 on a joint return), or, if less, your total of wage income and self-employment income.

You can qualify if:

-neither you or your spouse are eligible to participate in a qualified plan, or

-You are a joint filer and you or your spouse are eligible to participate in a qualified pension or profit-sharing plan (including a 401(k)), and your adjusted gross income does not exceed $60,000. The deduction phases out between $60,000 and $70,000. For the spouse who doesn't participate in a qualified plan, the phaseout range is $150,000 - $160,000.

-You are a single taxpayer eligible to participate in a qualified plan and your adjusted gross income does not exceed $40,000. The deduction phases out between $40,000 and $50,000.

If you were at least 50 years old by the end of 2003, you can add $500 to these limits.

Don't forget Roth IRAs: even if you qualify for a deductible IRA contribution, you may prefer to contribute to a Roth IRA instead (any contribution to a Roth IRA reduces your maximum deductible IRA contribution). Roth IRA contributions are not deductible, but all Roth IRA earnings are tax-free on withdrawal if certain conditions are met. Go here for more on Roth IRAs.

IRA SAVER'S CREDIT

Some taxpayers get an additional benefit for IRA contributions. Taxpayers 18 or older with adjusted gross income below $50,000 may qualify for a credit that can reduce federal tax by as much as $1,000.

The "saver's credit" is available to taxpayers filing joint returns with adjusted gross income of up to $50,000 ($37,500 for heads of household and $25,000 for single taxpayers). The credit directly reduces federal taxes by 10% to 50% of the IRA contribution, depending on income, with a maximum credit of $1,000.

This credit is unavailable to dependents or full-time students. You claim the credit by filing Form 8880.

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