A Last Chance and First Chance for IRAs

By , Staff writer of The Christian Science Monitor

Here's one sure-fire way to lower your tax bill for 1996.

Slap some money into an individual retirement account (IRA).

If you qualify, you won't pay taxes until you start withdrawing the

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money, most likely during retirement. By then, your IRA nest egg will be

bigger and your tax bracket could well be lower.

But hurry. Today is the tax filing deadline, and the deadline to

deduct an IRA investment from 1996 taxable income, even if you receive

an extension for filing your return.

You can even borrow money for an IRA and still take the deduction.

Generally, the maximum contribution for '96 is $2,000 for an

individual, $2,250

for a couple.

One popular type of IRA, self-directed, offers the most options -

mutual funds, stocks, bonds, and more.

If you miss the deadline, don't despair. There's another IRA goody

available until April 15, 1998.

For 1997, the limits get bigger: up to $2,000 for each spouse.

If neither you nor your spouse contribute to a voluntary retirement

plan at work, each of you may deduct up to $2,000 in IRA contributions

from your 1997 income. (As long as you're under age 70-1/2 and one of

you works.)

If one of you does have a plan at work, you can still fund your IRAs

up to $2,000. But it won't be fully deductible if your adjusted gross

income exceeds $40,000 for a joint tax return or $25,000 for an

individual return. Above those levels, you lose $10 of deductibility for

every $50 in income.

And be careful about pooling deductible and nondeductible

contributions in the same IRA.

Taxes get tricky when you start withdrawing money later on.

For more information , check out "J.K. Lasser's Your Income Tax 1997"

(Simon & Schuster). It's cheap, $14.95, easy to read and thorough.

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