IRA Contributions: Still Time for 2018

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Even though tax filing season is well underway, there is still time to make a contribution to your IRA for 2018.  You have until your tax return due date (not including extensions) to contribute up to $5,500 for 2018, rising to $6,000 in 2019.  If you are age 50 or over, you can contribute an extra $1,000 as a catch-up contribution.  For most tax payers, the contribution deadline for 2018 is April 15, 2019.

You can contribute to a traditional IRA, a Roth IRA, or both, as long as your total contributions do not exceed the annual limit or, if less, 100% of your earned income.  You may also be able to contribute to an IRA for your spouse for 2018, even if your spouse did not have any 2018 income.

Traditional IRA

You can contribute to a traditional IRA if you had taxable compensation and you were not over the age of 70½ by December 31, 2018.  However, if you or your spouse was covered by an employer-sponsored retirement plan in 2018, then your ability to deduct your contributions may be limited or eliminated, depending on your filing status and modified adjusted gross income (AGI).

If you are covered by a retirement plan at work, use this table to determine if you modified AGI affects the amount of your deduction.

If you are not covered by a retirement plan at work, use the following table to determine if your modified AGI affects the amount of your deduction.

Roth IRA

The tax rules differ for contributions to a Roth IRA, which are not tax-deductible. Money instead goes into a Roth IRA after taxes have been paid on it, and you can withdraw contributions at any time free of taxes or penalties. The earnings can also be withdrawn tax- and penalty-free once you have owned the Roth for five years and you’re at least age 59½.  Also, Roth IRAs don’t have required minimum distributions. The amount that can be contributed to a Roth IRA is subject to income limits.

Additionally, you can add funds to a Roth IRA at any age, provided you have earned income from, say, a job or self-employment. Traditional IRAs close the door to new contributions once you turn 70½, even if you are still working.

If you are thinking about making a contribution to your traditional IRA to save on taxes, there is still time.  If you have any questions on what options are available to you, please reach out to us at concierge@wallerandwax.com.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. You should discuss any tax or legal matters with the appropriate professional. Withdrawal of pre-tax contributions and/or earnings from a Traditional IRA will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty. 401(k) plans are long-term retirement savings vehicles. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty. Prior to making an investment decision, please consult with your financial advisor about your individual situation.