If you haven’t made your 2023 IRA contribution yet, today is your final opportunity to do so and potentially claim a tax break. The deadline to file taxes and contribute to your IRA for the 2023 tax year is April 15 for most taxpayers.
IRA Contribution and Deduction Guidelines for 2023
For the 2023 tax year, the IRA contribution limit is $6,500, with an additional $1,000 allowed for those aged 50 and above. Eligible taxpayers can still make their 2023 IRA contributions until the April 15 deadline.
Contributions can be made to a traditional IRA, a Roth IRA, or both, but the combined total across all IRAs cannot exceed the limit or 100% of the taxpayer’s taxable compensation, whichever is lower. It is also possible to contribute to an IRA for a spouse, even if they have no earned income.
These contributions might qualify for an “above-the-line” deduction, which can be claimed even without itemizing tax breaks. However, because IRA deduction rules can be complex, consulting a tax expert is advisable.
Three main factors determine eligibility for a pretax IRA deduction: filing status, adjusted gross income (AGI), and whether the taxpayer has a workplace retirement plan.
For those without a workplace retirement plan, there is no limit on IRA deductions, though the rules become more complicated for those who do have such a plan. Based on the above factors, taxpayers may be able to deduct part, all, or none of their pretax IRA contributions.
For instance, single filers with a modified adjusted gross income (MAGI) of $73,000 or less can claim a full deduction, while a partial deduction is available for incomes up to $83,000 in 2023. For couples filing jointly, a full deduction is available if their income is $116,000 or less, with a partial deduction available up to $136,000.
For more information on the 2023 IRA contribution and deduction limits, refer to the IRS website.
Consider a Roth IRA
If a traditional IRA contribution isn’t an option, a Roth IRA may be worth considering. While Roth IRA contributions are not tax-deductible, withdrawals can be tax-free if the account is at least five years old and the taxpayer is 59½ or older, becomes disabled, or dies.
Single filers with an MAGI of $138,000 or less can make a full Roth IRA contribution for 2023, while the income limit for married couples filing jointly is $218,000 or less. Partial contributions are permitted if income meets the threshold.
While it may be tempting to make last-minute 2023 IRA contributions, it’s important to assess your financial goals first rather than rushing into a decision.