Don’t worry if you forgot to contribute to an IRA in 2017.
Unlike a 401(k), which requires employee contributions to be made in the same calendar year in which the deduction is taken, IRAs still allow you to contribute for the prior year as long as your contribution is made before the tax deadline.
2017 Tax Deadline
This year, the tax deadline has been extended to Tuesday, April 17th. There are two reasons for the extension. First, April 15th falls on a Sunday. When this happens, the deadline is typically pushed back to Monday the 16th. However, Monday happens to be a recognized holiday in the District of Columbia (Emancipation Day), so the IRS is giving you two extra days to make IRA contributions and file your tax return this year.
Traditional vs. ROTH IRAs
We’ve covered this topic extensively throughout the years since it’s one of the most common questions we get from clients. If you need a refresher, refer to this article posted last year by Matthew Vitlin: Traditional vs. ROTH IRAs – Which Should I Choose?
For individuals under the age of 50, contribution limits for Traditional and ROTH IRAs in 2017 are $5,500 again. Individuals over the age of 50 can take advantage of $1,000 catch-up contribution as well, bring their max contribution to $6,500.
SEP IRA Contributions
If you’re self-employed, consider using a SEP IRA to increase your retirement savings. While the calculation for sole proprietors can be tricky, generally speaking you’ll be able to deduct between 20-25% of your income, up to the current annual limit of $54,000. If you have the income to support this large of a contribution, you’ll not only drastically reduce your taxes for the year, but you’ll also give yourself a huge boost in retirement savings.
Extension for SEP IRA Contributions
If you extend your tax return, your Traditional and ROTH IRA contributions still need to be made by the tax deadline date of April 17, 2018.
If, however, you elect to use a SEP IRA, your ability to make a contribution extends along with your return. This means you’ll have more time to continue saving money throughout the year to reduce your 2017 taxes.
Do You Have Questions?
If you have IRA questions that we haven’t answered, please don’t hesitate to reach out to us directly. Our online booking options make it easy to get an appointment with us.