If you have a traditional Individual Retirement Account (IRA), the rules for reporting your contributions are fairly simple. You can deduct your IRA contributions on Form 1040, Schedule 1, Part II — Income Adjustments. The worksheets are available on Form 1040 InstructionsPDF or Publication 590-A, Contributions to Individual Retirement Agreements (PDF). The deduction is claimed on Form 1040, Schedule 1PDF.
Non-deductible contributions to a traditional IRA are reported on Form 8606, non-deductible IRASPDF. Unlike traditional IRAs that are funded with pre-tax dollars, contributions to roth IRAs are made with after-tax dollars. In addition, low- and moderate-income taxpayers who make these contributions may also qualify for the Saver's Credit. If your total taxable income falls below those limits, your total taxable income becomes your IRA contribution limit.
Taxpayers should use Form 8880, Credit for Qualified Retirement Savings ContributionsPDF, to claim the Saver's Credit, and its instructions for details on how to calculate the credit correctly. In addition, contributions to the IRA are prohibited once you turn 70 and a half, and contributions to the Roth IRA are prohibited once you reach certain income thresholds, as determined by your filing status. Depending on the type of IRA you have, you may need Form 5498 to report the IRA contribution deductions on your tax return. Roth IRAs, on the other hand, offer after-tax savings, which are generally better when you expect your tax rate to be higher in retirement.
The Saver's Credit, also known as the Retirement Savings Contribution Credit, is often available to IRA taxpayers whose adjusted gross income falls below certain levels. By making retirement contributions to an IRA, you may qualify for a tax deduction on your tax return. In general, FICA (Social Security and Medicare) taxes are calculated on wages, including wage deferrals that a person makes in a company plan, such as a SIMPLE IRA or 401 (k). Line 28 of Form 1040 Deduction above the line for contributions to SEP IRAs for self-employed, SIMPLE IRAs, and qualified plans.
Qualifying contributions to one or more traditional IRAs are deductible up to the contribution limit or 100% of the taxpayer's compensation, whichever is less. The reason Roth IRA contributions aren't deductible is because withdrawals you make in retirement aren't taxable. If you are eligible to claim a tax deduction on your IRA contributions, you can report your IRA contributions on Form 1040, Schedule 1, Part II, Income Adjustments.