All About Annual IRA Contribution Deadlines: Traditional and Roth IRAs
Here's How Annual IRA Contribution Deadlines Actually Work in Your Favor
Individual retirement accounts (IRAs) are not only an indispensable tool for saving and investing for retirement, they are also great tools for tax planning - both today and in the future. There are two types of individual retirement accounts known as traditional IRAs and Roth IRAs. Both types of IRA offer tax-deferred growth on invested assets and follow similar rules for annual contribution limits, but where traditional IRAs and Roth IRAs differ the most is in their tax treatment.
Put simply, traditional IRAs can offer investors a tax deduction on before-tax contributions today and tax-deferred growth for the future whereas Roth IRAs offer investors the opportunity to invest after-tax money in a tax-deferred account with tax-free distributions in retirement. Of course, these differences come with their own sets of regulations and even eligibility criteria, which should be considered when deciding which IRA is best for you, but they do share one thing in common, which is their contribution deadlines.
Annual IRA Contribution Deadlines
You can contribute to your traditional or Roth IRA at anytime, making several small contributions over the course of the year or one lump sum contribution. That said, contributions are restricted based upon the tax year. Both traditional and Roth IRAs have their own limits on annual contributions and limits on their tax-advantaged benefits depending upon factors like your filing status and modified adjusted gross income.
Since there are annual contribution limits (and in the case of traditional IRAs some immediate tax benefits in the tax year in which the contribution is made), you must designate the tax year to which your contribution(s) are to be counted against.
To make a contribution for a specific year, you must do so by the tax filing deadline for that year.
In most cases, this means you must make your contribution by April 15 for it to be eligible to be counted as a prior year contribution. After that date, the contribution must be considered a current year contribution. This means that investors actually have 15 months to contribute to their IRA for a particular tax year. For example, for a 2017 IRA contribution, investors actually have from January 1, 2017 until April 16, 2018 to make their contribution(s) up to the annual limit. The same annual contribution deadlines apply for spousal IRA contributions, which allow working spouses to make an additional IRA contribution on behalf of a non-working spouse.
During most years the deadline for making IRA contributions for a given tax year is typically April 15 of the following year. For the 2018 tax year, the annual IRA contribution deadline is April 17, 2018.
Contribution Limits for Traditional and Roth IRAs
The maximum IRA contribution limit for IRAs is $5,500 for the 2017 and 2018 tax years. However, if you will be 50 or older by the end of the year, you can contribute an extra $1,000, for a $6,500 total contribution limit. These limits apply to both traditional and Roth IRAs. Although you may be eligible to contribute to both plans, your combined contribution to both accounts cannot exceed your above limit ($5,500 or $6,500).
The ability to qualify for a partial or full income tax deduction for a traditional IRA contribution is dependent on a couple of factors, including your income and whether you participate in another tax-advantaged retirement plan. Income limits also change over time. Roth IRA contributions are not tax deductible, they are made after tax. Once in there, however, the money is generally not taxed again. Even when you pull it out during retirement. While there are some restrictions, distributions from Roth IRAs are tax-free. To qualify for a Roth IRA, there are income limits.
Roth IRA Conversions
Unlike traditional IRA or Roth IRA contributions, Roth conversions do not follow the same deadlines as when you convert a traditional IRA assets to Roth IRA assets, the conversion is not actually considered a contribution.
Those IRA assets would have already been counted as part of annual contributions for previous years. As such, Roth conversion amounts are not subject to the same limits as IRA and Roth IRA contributions. You can convert IRA money to a Roth at any time and there is no maximum limit on the amount you can convert.
Updated by Scott Spann