The tax filing deadline is fast approaching, which means time is running out to fund an IRA for 2024. If you had earned income last year you may be able to contribute up to $7,000 for 2024 ($8,000 for those age 50 or older by December 31, 2024) up until your tax return due date, excluding extensions. For most people, that date is April 15, 2025. You can contribute to a traditional IRA, a Roth IRA, or both. Total contributions cannot exceed the annual limit or 100% of your taxable compensation, whichever is less. You may also be able to contribute to an IRA for your spouse for 2024, even if your spouse had no earned income.
If you and your spouse were not covered by a work-based retirement plan in 2024, your traditional IRA contributions are fully tax deductible. If you were covered by a work-based plan, you can take a full deduction if you are single and had a 2024 modified adjust gross income (MAGI) of $77,000 or less, or married filing jointly with a 2024 MAGI of $123,000 or less. You may be able to take a partial deduction if your MAGI falls within the following limits: if covered by a work-based plan and filing as single, a partial deduction may be allowed if MAGI is between $77,000 and $87,000; or, if covered by a work-based plan and filing as married filing jointly, a partial deduction may be allowed if MAGI is between $123,000 and $143,000. If your MAGI exceeded the upper limit, no deduction is allowed. If you were not covered by a work-based plan but your spouse was, you can take a full deduction if your joint MAGI was $230,000 or less, a partial deduction if your MAGI fell between $230,000 and $240,000 and no deduction if your MAGI was $240,000 or more.
If you can’t make a deductible traditional IRA contribution, a Roth IRA may be a more appropriate alternative. Although Roth IRA contributions are not tax-deductible, qualified distributions are tax fee. You can make a full Roth IRA contribution for 2024 if you are single and your MAGI was $146,000 or less, or married filing jointly with a 2024 MAGI of $230,000 or less. Partial contributions may be allowed if your MAGI falls within the following limits: if filing as single and your MAGI is between $146,000 and $161,000; or if you file married filing jointly and your MAGI is between $230,000 and $240,000. If your MAGI exceeded the limit, you cannot contribute.
A qualified distribution from a Roth IRA is one made after the account is held for at least five years and the account owner reaches age 59 , becomes disabled, or dies. If you make an initial contribution no matter how small to a Roth IRA for 2024 by your tax return due date, and it is your first Roth IRA contribution, your five-year holding period starts on January 1, 2024.
Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. To the extent this material concerns tax matters, it is not intended or written to be used by a taxpayer for purposes of avoiding penalties that may be imposed by law.
