There’s still time to meet the IRA contribution deadline for 2023

The tax deadline is approaching and there’s still time to get a deduction with a pre-tax Individual Retirement Account contribution – if you qualify.

For 2023, the IRA contribution limit was $6,500, plus an additional $1,000 for investors age 50 and older. This amount increased to $7,000 for 2024, with an additional $1,000 for catch-up contributions.

You can still add money to your IRA for 2023 before the federal tax deadline, which is April 15 for most taxpayers. But you must designate the filing for the 2023 tax year.

Learn more about personal finance:
There’s still time to reduce your tax bill or increase your refund before the deadline
An ‘Often Overlooked’ Retirement Savings Option Can Reduce Your Tax Bill
Some retirement savers may still qualify for ‘special tax credit,’ IRS says

A last-minute pre-tax IRA contribution for 2023 could qualify for an “above the line” deduction, which you can claim even if you don’t itemize the tax breaks, and it reduces your adjusted gross income.

However, IRA deductibility rules can be “very confusing,” according to Mark Steber, director of tax information at Jackson Hewitt.

Your eligibility for a pre-tax IRA deduction depends on three factors: your filing status, your modified adjusted gross income, and your workplace retirement plan.

If you don’t have a retirement plan at work, there is no income limit for IRA deductions, which could be attractive to high earners, experts say.

But it’s more complicated if you participate in a workplace pension plan. “Sharing” may include employee contributions, company matches, profit sharing, or other employer deposits.

“It’s important to understand that there are limits to deductibility,” certified financial planner Malcolm Ethridge, executive vice president of CIC Wealth in Rockville, Maryland, told CNBC recently.

You can deduct all, part, or none of your IRA contributions before taxes, depending on your filing status and income. The full IRS eligibility table is available here.

For 2023, there is a full deduction for single filers with modified adjusted gross income of $73,000 or less, and a partial deduction up to $83,000.

The limits are higher for married couples filing jointly, with a total deduction of $116,000 or less and a partial deduction before reaching $136,000.

“Even if you’ve maxed out the plan at your current business, your income might still be low enough to make a tax-deductible contribution (IRA),” Ethridge said.

While it may be tempting to take a last-minute deduction with a pre-tax contribution, you need to consider your goals and timeline before proceeding, experts say.

The contribution could provide a benefit this year, but would create a future “tax problem,” said CFP Laura Mattia, CEO of Atlas Fiduciary Financial in Sarasota, Florida.

Additionally, you need to weigh your immediate priorities, including major expenses, because “you don’t want to use a retirement vehicle for short-term saving,” she said.