You Can Maximize Your IRA Contributions for Longer Than You Think
Individual retirement accounts (IRAs) are available to anyone with taxable income, even if you have a retirement benefit from work. Like other types of retirement accounts, IRAs have tax advantages: If you contribute to a traditional IRA, you get a tax deduction now, while a Roth IRA can be taken tax-free in the future. Annual IRA contribution limits are relatively low compared to other types of tax-advantaged accounts—up to $7,000 total for your IRAs for 2024, or $8,000 if you’re 50 or older.
If you have more than one IRA—for example, a Roth IRA and a traditional IRA—you can make contributions of $7,000 each, rather than $7,000 each. This amount can be divided as desired, but there are limits on Roth contributions based on your income and filing status. (There are also deduction limits for traditional IRAs if you or your spouse have an employer-sponsored retirement plan.)
Although the deadline to contribute to some retirement accounts to qualify for the tax break is December 31, you have a few extra months to make IRA contributions.
When is the due date for IRA contributions?
The last day to contribute to your IRA’s annual limit is the filing deadline for that tax year. For example, you have until April 15, 2025 , when 2024 tax returns are due, to maximize your 2024 IRA contributions. Contributions for 2025 can be made until April 15, 2026, and so on.
Filing a return filing extension does not extend the deadline for paying IRA contributions.
Why You May Want to Maximize Your Annual Contributions
If you don’t max out your IRA in 2024 for any reason (for example, you opened an account later in the year or made smaller contributions during the year), you can apply contributions at the start of 2025, plus the extra cash on hand until limit for 2024. If you earn more at the end of the year or have extra money to invest, you’ll be able to take advantage of the maximum tax benefits for both years. You might even be able to get ahead, maxing out in 2025 before the end of the year, and be ready to contribute a larger lump sum by next year right at the start of 2026 ( investing early means more time for compounding to work ).
The best course of action for your money and investments depends on your personal situation, and it’s always a good idea to consult a tax professional before making any important decisions.
How to change your preferred tax year for contributions
Generally speaking, your IRA contributions will default to the tax year in which they were made: contributions made before December 31, 2024 will count toward your 2024 limit, and contributions made on or after January 1, 2025. will apply to your 2024 limit. 2025. If you want funds deposited on or after January 1 to be applied to the previous tax year, contact the brokerage firm that manages your account. You can probably do this in advance or retroactively to April 15, but you’ll need to know how your brokerage manages tax year preferences.
If you accidentally contributed more than the annual limit, you also have time before filing your return to transfer or withdraw the excess. Otherwise, you will pay a tax penalty of 6% of this amount .