Make a Deductible IRA Contribution for 2018. It’s Not Too Late

Dec 16, 2019 | Financial Planning

If you haven’t already maxed out your 2018 IRA contribution limit, consider making one of these three types of contributions by the April deadline:

    1. Deductible traditional. With traditional IRAs, account growth is tax-deferred and distributions are subject to income tax. If you and your spouse don’t participate in an employer-sponsored plan such as a 401(k), the contribution is fully deductible on your 2018 tax return. If you or your spouse do participate in an employer-sponsored plan, your deduction is subject to the following MAGI phaseout:

       

      • For married taxpayers filing jointly, the phaseout range is specific to each spouse based on whether he or she is a participant in an employer-sponsored plan:
        • For a spouse who participated in 2018: $101,000–$121,000.
        • For a spouse who didn’t participate in 2018: $189,000–$199,000.
      • For single and head-of-household taxpayers participating in an employer-sponsored plan: $63,000–$73,000.

       

Taxpayers with MAGIs within the applicable range can deduct a partial contribution. But those with MAGIs exceeding the applicable range can’t deduct any IRA contribution.

    1. Roth. Roth IRA contributions aren’t deductible, but qualified distributions — including growth — are tax-free, if you satisfy certain requirements.

      Your ability to contribute, however, is subject to a MAGI-based phaseout:

      • For married taxpayers filing jointly: $189,000–$199,000.
      • For single and head-of-household taxpayers: $120,000–$135,000.

       

You can make a partial contribution if your 2018 MAGI is within the applicable range, but no contribution if it exceeds the top of the range.

  1. Nondeductible traditional. If your income is too high for you to fully benefit from a deductible traditional or a Roth contribution, you may benefit from a nondeductible contribution to a traditional IRA. The account can still grow tax-deferred, and when you take qualified distributions, you’ll only be taxed on the growth.

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