Did you max out the contribution limits in your retirement plan for 2017? If not, you still have time. In fact, you can make last-minute IRA and 401(k) contributions for 2017 to get a head-start on your contributions for 2018 right now, before you file taxes for 2017.
How do IRA and 401(k) contributions work?
IRS rules give you until the day you file your taxes (which includes extensions!) for the preceding year for IRA and 401(k) contributions to count on that year’s tax return. This year, the deadline is April 17, 2018 to file for 2017.
Most people know that if you own an IRA, you can make contributions to that account throughout the year. You can max out your limits (and you should) every year to reap the rewards of not only adding more capital to invest, but also to take advantage of compound interest.
Depending on the type of retirement plan you have, contributions can impact and reduce your tax liability. So, if you need another deductible action for 2017, make that contribution to your IRA today.
And, here’s another tip:
You can make two separate contributions now to count for 2017 AND to jump-start your contributions for 2018.
Make sure you specify your contributions for the years they are meant for.
For example, let’s say you have a traditional IRA and only contributed $2000 of the $5500 limit for 2017. Before you file your taxes, you can make a contribution of $3500 marked for 2017. You can also go ahead and make a contribution for 2018—as long as you specify that additional contribution is meant for that year.
Note: If you have a 401(k), a SEP or SIMPLE IRA where the employer contributes to your plan, employer deadlines for contributing to your plan differ from yours as an employee. For SEP and SIMPLE IRAs, you’re considered both an employer and employee.
Your 401(k) plan employer should be on top of this. And, so should you if you have a SEP or SIMPLE IRA. Consult with your tax advisor to ensure all contributions are timely and comply with IRS guidelines to protect yourself.
If you have any questions about 2017 IRA or 401(k) contribution limits to your self-directed retirement plans, contact Advanta IRA today.