2019 IRA Contribution Deadline Has Been Extended

Due to the coronavirus tax filing extension, there's still time to make a regular IRA contribution for 2019. You have until your tax return due date (not including extensions) to contribute up to $6,000 for 2019 ($7,000 if you were age  50 or older on  December 31, 2019). For most taxpayers, the contribution deadline for 2019 is July 15, 2020.

You can contribute to a traditional IRA, a Roth IRA, or both, as long as your total contributions don't exceed the annual limit (or, if less, 100% of your earned income). You may also be able to contribute to an IRA for your spouse for 2019, even if your spouse didn't have any 2019 income.

Traditional IRA

You can contribute to a traditional IRA for 2019 if you had taxable compensation and you were not age 70½ by December 31, 2019.   However, if you or your spouse was covered by an employer-sponsored retirement plan in 2019, then your ability to deduct your contributions may be limited or eliminated, depending on your filing status and  modified adjusted gross income (MAGI). (See table below.) Even if you can't make a deductible contribution to a  traditional IRA, you can always make a nondeductible (after-tax) contribution, regardless of your income level. However,  if you're eligible to contribute to a Roth IRA, in most cases you'll be better off making nondeductible contributions to a Roth, rather than making them to a traditional IRA.

2019 income phaseout ranges for determining deductibility of traditional IRA contributions:
1. Covered by an employer-sponsored plan and filing as:	Your IRA deduction is reduced if your MAGI is:	Your IRA deduction is eliminated if your MAGI is:
Single/Head of household	$64,000 to $74,000	$74,000 or more
Married filing jointly	$103,000 to $123,000	$123,000 or more
Married filing separately	$0 to $10,000	$10,000 or more
2. Not covered by an employer-sponsored retirement plan, but filing joint return with a spouse who is covered by a plan	$193,000 to $203,000	$203,000 or more

 

Roth IRA

You can contribute to a Roth IRA even after reaching 70½  if your MAGI is within certain limits. For 2019, if you file your federal tax return as single or head of household, you can make a full Roth contribution if your income is $122,000 or less. Your maximum contribution is phased out if your income is between $122,000 and $137,000, and you can't contribute at all if your income is $137,000 or more. Similarly, if you're married and file a joint federal tax return, you can make a full Roth contribution if your income is $193,000 or less. Your contribution is phased out if your income is between $193,000 and $203,000, and you can't contribute at all if your income is $203,000 or more. And if you're married filing separately, your contribution phases out with any income over $0, and you can't contribute at all if your income is $10,000 or more.

2019 income phaseout ranges for determining eligibility to contribute to a Roth IRA:
	Your ability to contribute to a Roth IRA is reduced if your MAGI is:	Your ability to contribute to a Roth IRA is eliminated if your MAGI is:
Single/Head of household	$122,000 to $137,000	$137,000 or more
Married filing jointly	$193,000 to $203,000	$203,000 or more
Married filing separately	$0 to $10,000	$10,000 or more

 

Even if you can't make an annual contribution to a Roth IRA because of the income limits, there's an easy workaround. You can  make a nondeductible contribution to a traditional IRA and then immediately convert that traditional IRA to a Roth IRA. Keep in mind, however, that you'll need to aggregate all traditional IRAs and SEP/SIMPLE IRAs you own — other than IRAs you've inherited — when you calculate the taxable portion of your conversion. (This is sometimes called a "back-door" Roth IRA.)

If you make a contribution  — no matter how small — to a Roth IRA for 2019 by your tax return due date and it is your first Roth IRA contribution, your five-year holding period for identifying qualified distributions from all your Roth IRAs (other than inherited accounts) will start on January 1, 2019.

Finally, note that 2019 is the last tax year for which the age 70½ restriction on traditional IRA contributions applies. Due to passage of the SECURE Act in late 2019, beginning with the 2020 tax year, investors over the age of 70½ will be able to contribute to a traditional IRA provided they have compensation equal to at least the amount of the contribution (spousal IRA rules will remain in effect). (Keep in mind that if you're using a back-door Roth IRA strategy for 2019, the age 70½ rule still applies.)

IMPORTANT DISCLOSURES

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC.