Can You Make Roth IRA Contributions For Previous Years?
Financial Planning
February 23, 2024
As tax time comes around each year, clients often ask us, “can I still make an IRA/ Roth IRA contribution for last year?” The good news is if it is before the tax filing deadline (i.e., April 15, 2024 for the 2023 tax year), yes, you might be able to.
Who can make a retroactive IRA or Roth IRA contribution?
Roth IRA contribution eligibility is determined by your Modified Adjusted Gross Income (MAGI) and your age. Traditional IRA contribution eligibility is not limited by MAGI or age.
Additional questions to consider to determine if a retroactive IRA contribution is right for you:
- Did you receive a bonus from work last year?
- Do you plan to have increased cash flow this year?
- Did you earn more last year than you expect to earn this year?
- Did you fail to max out contributions to your 401k last year?
- Do you participate in an employer-sponsored plan (i.e. 401k) but didn’t contribute to a Roth IRA or other IRA yet for last year?
Are Roth IRA contributions taxable?
Roth IRA contributions are not tax deductible. Contributions are made post-tax, meaning you will pay taxes on them before you put the funds into your Roth IRA account. When you retire, you will be able to withdraw the money tax-free. Roth IRAs are an excellent way to give you access to tax-free money in retirement.
Are other IRA contributions taxable?
The deductibility of your Traditional IRA contribution may be determined by your modified adjusted gross income (MAGI) and your tax filing status.
What is the max Roth IRA contribution amount?
Roth IRA contribution limits are determined by your MAGI and age. In general, the Traditional IRA and Roth IRA contributions limit for 2023 is $6,500 for those under 50 and $7,500 for those 50 and over. More details can be found by going to the IRS website.
You may not have an IRA or Roth IRA account, but you can easily open and fund one at any time. As CERTIFIED FINANCIAL PLANNERS™ we generally believe in maximizing the use of IRAs because they help you:
- Save money for your retirement.
- Put your extra cash to work for you.
- Reduce your tax liability, saving you even more money.
Speak with your CPA or other tax advisor to determine if you qualify for a retroactive IRA contribution for last year.
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