Introduction

The IRS offers many ways to get tax-free money into your traditional IRA account. You have until April 15 each year to make a contribution and deduct it from your taxes during the current year. There are also limits on how much you can contribute and some advantages to making contributions early in the year. Here’s what you need to know about making contributions for 2019:

Traditional IRA contribution deadline

The deadline for making a traditional IRA contribution is the tax filing deadline, including extensions. For example, if you want to make a traditional IRA contribution for the 2018 tax year (the calendar year), it must be made by April 15, 2019. The same applies if you are filing an extension and have until October 15th as your extended deadline.

The deadline for making a traditional IRA contribution without an extension is also April 15th (or October 15th if you’re filing an extension).

Traditional IRA contribution eligibility

You may be eligible to contribute to a traditional IRA if you:

• Are under 70.5 years old
• Have earned income (e.g., salary, wages, tips) for the year. If you’re self-employed, earned income includes net income from the trade or business that is effectively connected with a U.S. trade or business and any net earnings from self-employment in excess of $400 per annum for 2016;
• cannot contribute to an employer-sponsored retirement plan at work such as 401(k), 403(b), 457 plan, or Thrift Savings Plan (TSP); and
• are not claimed as a dependent on someone else’s tax return

Traditional IRA contribution rules

Contributions to traditional IRAs are not tax-deductible. There are limits on how much you can contribute, and if you’re under age 70 1/2, there’s also a deadline for making contributions each year.

For example, You can make up to $6,000 in 2019 ($7,000 if age 50 or older). The amount is indexed for inflation, so it will increase slightly every year.

You may also be able to deduct some or all of your contribution if you itemize deductions on Schedule A (Form 1040) rather than take the standard deduction; however, this depends on your income level and whether or not there are other sources of income being reported on Form 8606 (e..g Social Security benefits).

Traditional IRA contribution withdrawal

If you’re contributing to a traditional IRA and plan on withdrawing money from it in the future, you might be wondering how much of your contribution can be withdrawn without being taxed. The answer is simple: 100%!

• A traditional IRA contribution is tax deductible, but withdrawals are not. This means that if you contribute $1,000 to your traditional IRA and then later withdraw it as part of your taxable income, only $900 will be taxable (because only $100 was originally deducted).
• However, if you had made no contributions at all during the year and just took out $1 million dollars from an existing account balance instead–then yes–that would be taxed at ordinary income rates.*

Traditional IRA contribution for tax savings

The tax benefits of traditional IRAs

In addition to the flexibility and investment options that come with a Roth IRA, there are also many reasons why you may want to contribute to a traditional IRA. If you’re looking for ways to reduce the amount of taxes that you pay each year, a traditional IRA can help. Contributions made through this type of account will be deductible from your taxable income–meaning that they can lower how much money gets taxed as part of your overall income. This means less money taken out by Uncle Sam!

Traditional IRA contribution and tax planning

While the tax savings from making contributions to a traditional IRA are significant, they’re not the only reason why you should consider opening an account. Tax planning is an important part of any financial strategy, and it can help you get more money into your traditional IRA account by reducing or eliminating taxes on your income. It also allows you to plan for when it will be most beneficial for the funds in that account to be used–whether that’s now or later on in life.

Traditional IRAs allow investors flexibility in how they use their retirement funds: You can withdraw money at any time without paying taxes on gains; even if there were no gains (or losses), all withdrawals would still be subject only to a 10% penalty if taken before age 59 1/2 years old (excepting special circumstances).

Traditional IRA contribution for retirement savings.

• The traditional IRA contribution deadline is the same as the tax-filing deadline. You can make a traditional IRA contribution for the 2018 tax year until April 15, 2019.
• The maximum contribution to a traditional IRA is the lesser of $6,000 or your taxable compensation for the year. This means if you had no wage income but earned an investment income of $5,000 in 2018, then your maximum allowable contribution would be $5,000 (lesser of those two).
• If you’re age 50 or older in 2019 and have not yet reached age 59-1/2 by December 31st, 2020 (or November 1st, 2021 if filing an extension), then your allowable maximum deduction increases from $6K/$7K pre-retirement ($12K total) to $8K/$10K post-retirement ($18K total).

The IRS gives you a lot of opportunities to get tax-free money into your traditional IRA account.

• The IRS gives you a lot of opportunities to get tax-free money into your traditional IRA account.
• You can make contributions up until the tax filing deadline for the year, which is usually April 15 of the following year.
• You can’t contribute to a traditional IRA if you are married but file separately from your spouse unless you live apart from each other for all of 2019 and don’t expect to be together at any time during 2020.
• The IRS also has strict rules about eligibility: if your modified adjusted gross income (MAGI) is above certain amounts, it could disqualify some or all of your ability to claim an IRA deduction on Form 1040 or 1040A and claim any associated tax savings on Schedule A with Form 8606 (which reports nondeductible contributions). If this situation applies to you and/or those who contributed money into their own accounts from January through April 2020, contact us before investing so we can help determine whether or not their investments will generate enough income after taxes have been deducted from them for them still provide value over time based upon our recommendations!

Conclusion

If you have a traditional IRA, it’s important to know all the ways you can contribute to it. You can make tax-deductible contributions at any time during the year, even if it’s not during the annual contribution period. You also have other options, such as making withdrawals from your account or rolling over money from another retirement plan into your traditional IRA account.