Attention taxpayers…the IRS is reminding those saving for retirement that they may be able to claim a deduction on their 2021 tax return for contributions to their Individual Retirement Arrangement (IRA) made through April 18, 2022. How much can you contribute? Let’s dive in here.

What is an IRA?

An individual retirement account, or IRA, is a tax-deferred retirement savings account. In a Traditional IRA, you pay income tax on your withdrawals.

A Roth IRA is a special individual retirement account that you fund with post-tax dollars (you are not permitted to deduct your contributions to the account from your income taxes). Earnings on the account and withdrawals after age 59½ are income tax-free as long as the account has been in existence for five years.

What is the contribution deadline?

For 2021, contributions can be made to a traditional or Roth IRA until the filing due date, April 18.

How much can you contribute?

Eligible taxpayers can typically contribute up to $6,000 for 2021. If you reached age 50 or older by the end of 2021, you are able to contribute $7,000 ($1,000 “catch-up” contribution).

How much is the deduction?

Contributions to one or more traditional IRAs may be deductible up to the contribution limit or 100% of the taxpayer's compensation (whatever is less).

Is there a maximum age for making IRA contributions?

No. You can contribute to a traditional IRA after age 70½.

Questions? Contact us.