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Make a 2015 Contribution to an IRA before Time Runs Out

03.21.16 | TAX Chat

Taxpayers who have not maxed out their 2015 IRA contributions can still do so and reduce their tax liability for the 2015 tax year. The deadline is April 18, 2016.

Tax-advantaged retirement plans allow your money to grow tax-deferred — or, in the case of Roth accounts, tax-free. But annual contributions are limited by tax law, and any unused limit can’t be carried forward to make larger contributions in future years. So it’s a good idea to use up as much of your annual limits as possible.

April 18 deadline
While it’s too late to add to your 2015 401(k) contributions, you can make 2015 IRA contributions until April 18, 2016. The limit for total contributions to all IRAs generally is $5,500, or $6,500  if you were 50 or older on December 31, 2015.

A traditional IRA contribution also might provide some savings on your 2015 tax bill. If you and your spouse don’t participate in an employer-sponsored plan such as a 401(k) — or you do but your income doesn’t exceed certain limits — your traditional IRA contribution is fully deductible on your 2015 tax return.

Evaluate your options
If you don’t qualify for a deductible traditional IRA contribution, see if you qualify to make a Roth IRA contribution. If you exceed the applicable income-based limits, a nondeductible traditional IRA contribution may even make sense. Neither of these options will reduce your 2015 tax liability, but they still provide valuable opportunities for tax-deferred or tax-free growth.

Should you have questions about your IRA contribution, contact me at hzemel@berdonllp.com or your Berdon advisor. We can help you determine which type of contributions you’re eligible for and what makes sense for you.

Hal Zemel, a Tax Principal at Berdon LLP, has more than 20 years in public accounting and advises businesses in the real estate, service, and manufacturing sectors.