Today is the last day to file your 2023 tax return, so if you haven’t yet made your IRA contribution for 2023 to claim a tax break, then today is your last chance. For most taxpayers, the last day to file taxes and make a 2023 IRA contribution is April 15.
IRA contribution and deduction rules for 2023
For tax year 2023, the IRA contribution limit for most taxpayers is $6,500, with a $1,000 increase for those age 50 and older. Thus, eligible taxpayers who haven’t yet met these limits can make a 2023 IRA contribution through April 15.
Eligible taxpayers can contribute to a traditional IRA, a Roth IRA, or both, but total contributions across all IRAs must not be more than the limit or 100% of taxpayers’ taxable compensation, whichever is less. Taxpayers may also contribute to an IRA for their spouse, even if the spouse has no earned income.
The 2023 IRA contribution may even qualify for an “above-the-line” deduction, which taxpayers can claim even if they don’t itemize tax breaks. However, the rules for IRA deductions can be very confusing, so it is better to consult a tax expert.
In general, three factors determine a taxpayer’s eligibility for a pretax IRA deduction: their filing status, adjusted gross income (AGI) and any workplace retirement plan they might have.
There is no IRA deduction limit for taxpayers with no workplace retirement plan, but the tax rules can be confusing for those who participate in such a plan. Depending on the above three factors, taxpayers can deduct part, all or none of their pretax IRA contributions.
For instance, a full deduction is available to single filers with a modified adjusted gross income (MAGI) of $73,000 or less, while a partial deduction is available to those with an income up to $83,000 in 2023. Similarly, couples filing together qualify for a full deduction if their income is $116,000 or less, while a partial deduction is available up to $136,000.
Visit the IRS website for more information on the 2023 IRA contribution and deduction limits.
Roth IRA is also an option
If a taxpayer is unable to make a traditional IRA contribution, he or she may consider a Roth IRA. Although Roth IRA contributions are not tax-deductible, they could be tax-free. Withdrawals from a Roth IRA are tax-free if the Roth is at least five years old and the taxpayer is 59½ years of age 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 also allowed if taxpayers meet the income limit.
At the end of the day, making last-minute 2023 IRA contributions could be tempting, but taxpayers should not do so instinctively. It is recommended that taxpayers prioritize their financial goals first before jumping to last-minute 2023 IRA contributions.
