Saving for retirement is an important part of life. There are a variety of options you can use to ensure you have the appropriate funds to support you in your golden years. If you’ve opted to contribute to an Individual Retirement Arrangement (IRA) you should be aware of how your contributions will factor in at tax time. Use the following tips to make sure you are maximizing your IRA’s potential.

1. You have to be less than 70 ½ years old by the completion of the tax year in order to contribute to a traditional IRA. Roth IRA plans do not have age restrictions.
2. You have to earn taxable income in order to contribute to an IRA. This income can come from multiple sources, including wages, self-employment salaries, tips, commissions, bonuses, and alimony. If you file a joint tax return with your spouse, only one of you needs to have taxable compensation.
3. You are able to contribute to your IRA at any point throughout the tax year. If you want the contribution to count for the tax year in which you are filing your return, you will need to contribute by the return’s due date, excluding granted extensions. The most common due date for many is April 15, and if you make a contribution between January 1 and April 15, you need to ensure your sponsor applies the contribution to the appropriate tax year.
4. Most IRAs have contribution limits. Typically, you can either contribute your taxable compensation amount, or $5,500, depending on which amount is smallest. For contributors over 50 years old, the limit is increased to $6,500. Exceeding these limitations will result in additional taxes of at least six percent.
5. Generally, you don’t pay income tax on the amount saved through a traditional IRA until you start distributions. There are some qualified distributions from a Roth IRA that are tax-free.
6. Contributions to a traditional IRA only may be deductible. Worksheets in Form 1040A or Form 1040 can help you determine if you’re entitled to a deduction.
7. Don’t forget about the Saver’s Credit, which can lessen your taxes by up to $2,000 if you file a joint return.