Things to know when making an IRA contribution

Parallel Financial |

As we near the IRS tax filing deadline, there are a few things to keep in mind if you are considering making a contribution to either your traditional or your Roth IRA:

  • Up until the April 15 tax filing deadline, you can still make a contribution for 2024 to either your traditional or Roth IRA. Be sure to let your IRA custodian or your financial advisor know to code it as a previous/prior year contribution.
  • Even if you have an extension of time for filing your tax return, any contribution for 2024 must be made by the April 15 deadline.
  • The maximum 2024/2025 contribution to be made for an individual under 50 is $7,000. For those 50 or older, the limit is $8,000.
  • The limit covers both types of IRAs – any individual’s total limit is $7,000 (or $8,000) – not per account. 
  • IRA contributions are based on taxable compensation. Salary from employment, or income from self-employment count, but investment income, pension income, or Social Security do not count. 
  • In spousal relationships where one spouse does not work and one spouse does, the spouse who does not work can still make an IRA contribution based on the working spouse’s taxable income. This contribution cannot exceed the amount of the spouse’s compensation, adjusted by any IRA contribution the working spouse makes for themselves. 
  • Traditional IRA contributions are not subject to income limits; Roth IRA contributions are.
  • Many taxpayers can deduct their traditional IRA contributions; for those who actively participate in employer plans, those who have earned higher income will be phased out.
  • There are no age restrictions to make a contribution to either your traditional or Roth IRA. 
  • IRS tax form 5498 comes from your IRA custodian to report your contributions to you as well as to the IRS. This form is for your own records. 

It is important to follow the guidelines above to make the correct contribution to your account. If you have questions about the process, reach out to your CPA or financial advisor for answers and advice.