It’s that time of the year when the procrastinators come out of the investing woodwork and need to make an IRA contribution. Well, you slowpokes, you still have some time and we will keep this post quick, so you don’t waste time reading this and instead go make these contributions.
You can make an IRA contribution for the 2021 tax year up until this year deadline, which is April 18 for most. That doesn’t leave much time, but if you have some extra income go ahead and deposit it into an IRA account before time expires. Remember, in some cases, Traditional IRA contributions are tax deductible (talk with your CPA!). It’s all dependent on your income.
If you’re single and don’t participate in a retirement plan at work, you can make a tax-deductible IRA contribution for 2021 of up to $6,000 ($7,000 if you’re 50 or older) regardless of your income. This is up from $1,500 when the IRA was investing in 1974 (history tidbit there). If you’re married and your spouse is covered by a workplace-based retirement plan but you’re not, you can deduct your full IRA contribution as long as your joint AGI doesn’t top $198,000 for 2021. You can take a partial tax deduction if your combined income is between $198,000 and $208,000.
For those that aren’t too worried about taking a tax deduction, then perhaps a ROTH IRA may be more your speed. If you file taxes as a single person, your Modified Adjusted Gross Income (MAGI) must be under $140,000 for the tax year 2021 and under $144,000 for the tax year 2022 to contribute to a Roth IRA, and if you’re married and file jointly, your MAGI must be under $208,000 for the tax year 2021 and 214,000 for the tax year.
And finally, if you are self-employed, you can contribute up to $58,000 for 2021 ($61,000 for 2022) into a SEP-IRA. Be careful here though, as contributions are limited to 25% of your net earnings from self-employment. A good accountant will be able to tell you exactly what type of IRA and also what is the maximum amount you can contribute towards one of these tax-deferred investments. And remember, don’t just leave these IRAs sitting in cash. Be sure to work with an advisor (or yourself) to invest the funds into some solid long term investments.
Sustainvest offers an easy to use digital platform for opening an IRA and making a contribution at www.sustainfolio.com. Check it out.