Squeezing One Last Deduction out of 2009

Surprisingly, many people do not realize that they can still get one last deduction out of 2009 even though their current calendar reads 2010. No, this isn’t fantasy or traffic grasping SEO hype — there really is one way for you to still get another deduction on your 2009 taxes. Ready? Here goes:

If you want to get just one more 2009 tax deduction then make a contribution to your already existing IRA account on or before April 15th, 2010.

It’s All In The Details

One of the most important points to note about this deduction is that, in order to take advantage of it, you must have had the IRA you make a contribution to opened in or before 2009. That means you cannot open an IRA account in 2010 and then fund it in 2010 while receiving a deduction for 2009.

The second point to make note of is the deadline to make this contribution. If you plan to make a contribution to a SEP, Roth or traditional IRA that was created in or before 2009 then you only have until April 15th to do so. In most cases, making a deductible contribution means that you must have the money in your IRA account by April 15th. If you mail it or bring it into your broker’s office on April 15th it may not be deductible for 2009. Your CPA is a great resource for determining whether or not your broker’s constructive receipt or an April 15th postmark is enough to get the deduction.

2009 Contribution Limits Still Apply

In case you are wondering, you can make contributions to both your Roth and traditional IRA and deduct the entire amount as long as you stay within 2009 contribution limits, which are:

  • $5,000 (cumulative) for a Roth or traditional IRA if you are under age 50 and $6,000 if you are 50 or over.
  • The lesser of $46,000 OR 25% of your income (up to $230,000) to your SEP regardless of your age.

In order to ensure that you get the deduction for 2009, be sure to mark the memo line of your check “Contribution for 2009.”

Don’t Forget To Direct the Funds

Now, while you are rushing to make that last minute deduction, don’t forget that the money inside an IRA will not necessarily invest itself. If your IRA is part of a managed account then you may be paying a fee to have financial decisions made for you, in which case your account manager or broker will likely invest the funds according to your risk tolerance and existing investments. If your account is not a managed account then your contribution may just be sitting in a money market until you call your brokerage firm and have the money invested. If you have a broker, chances are he or she will call you when they see the money come in but if you are using an online brokerage firm you may need to be proactive about the incoming funds.

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Author Info

This post was written by Yolander Prinzel. Yolander is a financial writer as well as a series 7, 66 and 2-15 licensed representative. During her decade of financial industry experience she has been an insurance agency director of marketing and director of operations, a life insurance underwriter, and a trading service specialist for Raymond James Financial Services. She was a featured speaker at the 2006 Hartford National Sales Conference and the 2006 Brookstreet Securities Annual Conference. Check out her portfolio at YolanderPrinzel.com

3 Responses to “Squeezing One Last Deduction out of 2009”

  1. David |  Feb 25, 2010 at 3:48 pm

    I believe you can also still get a 2009 tax deduction if you make a 2010 donation to Haiti relief as well.

  2. Yo Prinzel |  Feb 27, 2010 at 8:55 pm

    Hi David, thanks for the feedback:) Looks like donations must be made by 3/1/10 to get that deduction: http://www.irs.gov/newsroom/article/0,,id=218678,00.html