5 IRA Contribution Rules that Might Surprise You
It’s that time of year again. The deadline to file your taxes is just around the corner. It’s also a popular time for people to start contributing to an IRA. While these contributions are fairly straightforward, there may be a few surprises along the way. Here are 5 rules that you might not know about:
File now and fund later
People are always asking me if an IRA contribution has to be made before their tax return is filed. What’s surprising is, the answer is no. You can claim the deduction for your IRA contribution now, and fund it later after your taxes are filed. Some people are able to fund their IRA contribution with their tax return if the timing is just right. Just a word of advice, don’t wait too long. If you claim the contribution, make sure you get it done quickly.
Tax credits are available
Most people haven’t heard of the Saver’s Credit. It’s a tax credit available to lower-income workers who contribute to their IRA. This is basically a double tax break because it’s available in addition to any other deductions you may have already claimed. The maximum contribution limit is $2,000 and you can claim up to 50% credit towards that amount. You could be able to reduce your tax liability up to $1,000.
Spousal contributions can help stay-at-home spouses
If you are a stay-at-home spouse, it doesn’t necessarily mean you can’t make IRA contributions. If your spouse is earning taxable income, you can make spousal contributions to your IRA based on their taxable compensation. It is more than possible to build up your retirement savings as a stay-at-home spouse.
No age limits for Roth IRA contributions
You might think you’re too old to contribute to an IRA, but that might not be the case. While you’re no longer allowed to contribute to a tradition IRA once you reach age 70 ½, contributing to a Roth IRA might still be an option. There are no age limits for Roth IRA contributions, so anyone can make these contributions. This might be the perfect solution for retirees who work part-time, but don’t need the extra income. So, why not put that money towards your future?
No extensions for IRA contributions
Some people can take extra time to file their taxes, but this won’t affect the IRA contribution deadline. For 2018 traditional or Roth IRA contributions, the deadline is April 15, 2019. Even a partial contribution can help to lower your tax bill, so take advantage of this additional tax break.
These 5 rules might be exciting to read about, but I would encourage you to work with your fiduciary financial advisor or tax professional before making any big decisions. They can help you optimize your returns, contributions, and make your money work for you. Our goal is to help our clients to live a purposeful life in a complex world.
If you don’t know where to start, I would love to help. Give us a call.