IRA contributions for 2019 can be made up to the time you file your 2019 tax return.
When can I contribute: The IRS has extended the filing deadline to July 15, 2020 which extends the IRA contribution deadline as a result. Also, if you elect to take the six-month automatic extension to file, you have until October 15, 2020 to make a 2019 contribution. This may be an important opportunity for some taxpayers to fund their IRAs.
How much can I contribute: The annual contribution limit is $6,000 per person with an additional catch-up provision of $1,000 for taxpayers who are 50 or older. Taxpayers who turned 50 or older in 2019 may contribute $7,000 to an IRA for 2019.
What about a Roth IRA: The Roth IRA contribution limit is the same, however, you can only contribute the maximum of $6,000 ($7,000 for 50+) to a Traditional IRA or a Roth IRA or a combination of the two.
Income Requirement: In order to make an IRA or Roth IRA contribution you must have earned income, that is income from employment or self-employment, equal to or great than the contribution for the tax year. The deductibility of the Traditional IRA is dependent upon income caps. If the taxpayer is covered by an employer plan, the 2019 tax deduction phases out between $103,000 and $123,000 for a joint tax return and $64,000 and $74,000 for a single taxpayer. You can make a non-deductible contribution without an income cap.
To make a 2019 IRA contribution you must be under age 70 ½ in 2019. There is no age restriction for a Roth IRA contribution. In 2020 the age restriction was lifted under the SECURE Act for Traditional IRAs. Older taxpayers need to pay attention to the 70 ½ rule when making a 2019 contribution.
Spousal IRA Contribution: There is a provision in the tax code to make an IRA contribution for a non-working spouse. This is an opportunity some couples miss when filling a tax return. When only one of the couple is covered under a company plan, the income phase-out for deductibility is raised to $193,000 - $203,000 for 2019. This provides an opportunity for more taxpayers to contribute to an IRA and receive the tax deduction. Find more information here. The 70 ½ age restriction in 2019 also applies to a spouse. It is lifted for tax year 2020 and future.
Contributions in a Bear Market: If you are a long-term investor, dollar-cost-averaging into a bear market could be a good long-term strategy. If you want to maximize dollar-cost-averaging you could consider making monthly contributions until you file your tax return. This strategy may benefit from the volatility in the market if the market should go lower before it fully recovers. The shares purchased at low prices will benefit the most when the market recovers.
If you have questions about IRA contributions, give us a call. 540-772-4545 or email us at firstname.lastname@example.org.
Written by Connie C. Guelich, CFP, AEP, CLU, ChFC. This represents our views at the time of this writing, and it is subject to change. It is not intended to be personal investment advice. If you would like to discuss your own account, please don’t hesitate to call us. We are here to help and welcome your call.