You can still claim tax relief

Today is the last day to file your 2023 tax return. So if you haven’t yet made your 2023 IRA contributions, today is your last chance to claim the tax break. For most taxpayers, the deadline to file taxes and make 2023 IRA contributions is April 15.

2023 IRA Contribution and Deduction Rules

For tax year 2023, the IRA contribution limit for most taxpayers is $6,500, increasing by $1,000 for taxpayers age 50 or older. Therefore, eligible taxpayers who do not yet meet these limits have until April 15 to make their 2023 IRA contributions.

Eligible taxpayers can contribute to a Traditional IRA, a Roth IRA, or both, but the total contribution to all IRAs cannot exceed the taxpayer’s taxable compensation limit or 100%, whichever is less. Taxpayers may also contribute to an IRA for their spouse even if the spouse has no earned income.

2023 IRA contributions may qualify as a “top line” deduction that taxpayers can claim even if they don’t itemize the tax break. However, IRA deduction rules can be very confusing, so it’s a good idea to consult a tax professional.

Generally, three factors determine a taxpayer’s eligibility for the pre-tax IRA deduction: filing status, adjusted gross income (AGI), and employer retirement plan.

There is no IRA deduction limit for taxpayers without a workplace retirement plan, but the tax rules can be confusing for those who participate in such plans. Depending on the three factors above, taxpayers may be able to deduct some, all, or none of their pre-tax IRA contributions.

For example, a full deduction is available to single filers with modified adjusted gross income (MAGI) of $73,000 or less, and a partial deduction is available to those earning up to $83,000 in 2023. Similarly, if a married couple files jointly, they can fully deduct their income if their income is less than $116,000, and a partial deduction is possible up to $136,000.

For more information about 2023 IRA contributions and deduction limits, visit the IRS website.

A Roth IRA is also an option.

If taxpayers are unable to make traditional IRA contributions, they may consider a Roth IRA. Roth IRA contributions are not tax deductible, but may be tax exempt. Roth IRA withdrawals are tax-free if the Roth is older than age 5 and the taxpayer is age 59½ or older, becomes disabled, or dies.

Single filers with a MAGI of $138,000 or less can contribute the full amount to a Roth IRA in 2023, while married filers filing jointly have an income limit of $218,000 or less. Partial contributions are also permitted if the taxpayer meets the income limits.

Ultimately, while it may be tempting to make a last-minute contribution to an IRA in 2023, taxpayers’ first instinct should not be to do so. Taxpayers are encouraged to prioritize their financial goals before making last-minute 2023 IRA contributions.