When is the deadline for IRA contribution?

If you want to supplement your 401(k) retirement savings, you can use an IRA to save for retirement. An IRA allows retirement savers to make tax-deferred contributions to their retirement account. If you want to max out your IRA contributions, you must do so by the IRS tax deadline.

The deadline for IRA contributions is April 15, 2022. This means you have from January 1, 2021, to April 15, 2022, to contribute to your traditional IRA for the contributions to count in your 2021 tax return. Any contributions made to the IRA after April 15th, 2022 will be counted in your 2022 tax return. You can contribute up to $6,000 to an IRA, and an extra $1,000 if you are above age 50.

Eligible compensation

To be eligible to contribute to an IRA, the IRS requires that you must have earned income. Some of the incomes that qualify as earned income include salaries, wages, sales commissions, tips, and self-employment income.

However, some incomes like interest income, dividends, deferred compensation, and rental payment do not qualify as earned income, hence are ineligible compensation for IRA purposes. Also, disability payments, unemployment benefits, and partnership income that is not related to the activities of the business do not qualify as earned income.

How much can you contribute to IRA?

The IRS sets a combined contribution limit for all the IRAs you have. For 2022, you can contribute a maximum of $6,000 to an IRA, and an additional $1,000 if you are above age 50 by the end of the year.  

While you can have multiple IRAs, you can only contribute up to the IRS limit per year. This means that, if you have a traditional IRA and a Roth IRA, the cumulative contribution to both types of IRAs should not exceed the annual IRA limit.  

You can choose to contribute to your IRA in one lump sum or several small contributions spread over the year. If you decide to make monthly IRA contributions, you will need to contribute $500 for the 12 months to reach the annual limit of $6,000.

If you have a Roth IRA, your income must be below the IRS income limits to be allowed to contribute to the account. Since you contribute after-tax money to a Roth IRA, there are no immediate tax breaks on contributions.

The contribution deadline for IRA contribution

You must contribute money to your IRA by the tax deadline for the contributions to count for that year. For 2021, you can contribute to an IRA up to April 15, 2022. If the IRS extends the tax deadline, you would have until October 15 to contribute to your IRA.

For example, if you are 55 years old, and you have contributed $2,500 to your IRA by January 31, 2022, you can contribute an additional $1,500 each month in February, March, and April to max out your contributions before the April 15 deadline. This brings the total contributions to $7,000, including the catch-up contributions.

How to max out your IRA contributions

If you have not maxed out your contributions by the end of the calendar year, you can still make contributions to your IRA until the tax deadline for tax returns. Even after the end of the year, you have three more months to max out your contributions.

You can allocate contributions between January 1, 2022, and April 15, 2022. You can provide new instructions to the payroll department to increase the contributions to your IRA in the remaining months to the tax deadline.

If you miss out on the tax deadline to max out your IRA contributions for the tax year, you won’t be able to recover the lost opportunity. You will miss out on the tax deductions that would otherwise help lower the tax bill.

IRA income limits

If you (or your spouse) is enrolled in a 401(k) plan, you can make phased contributions to an IRA.

If you are a single or head of household, you can make the full contribution if your MAGI is below $68,000 in 2022. If your modified adjusted gross income (MAGI) ranges from $68,000 to $78,000 in 2022, you can make a partial contribution to the IRA. If your income is above $78,000 in 2022, you dont qualify to contribute to an IRA.

Married couples can make the full contribution if the MAGI is less than $109,000. If your MAGI ranges from $109,000 to $129,000 in 2022, you can make partial contributions to an IRA. If the MAGI exceeds $129,000 in 2022, you won’t be allowed to make contributions to an IRA.