If you haven’t already, you can still contribute to your IRA account for 2021. Technically, you have until the federal tax filing deadline to make your IRA contribution for the previous year. So for 2021, you can contribute to your IRA account for 2021 until April 18, 2022.
For 2021, the maximum amount you can contribute to a traditional IRA is $6,000 if you’re younger than age 50. Those who are older than 50 can add an extra $1,000 per year, bringing their maximum IRA contribution to $7,000.
You must have earnings from work to contribute to an IRA, and you can’t put more into the account than you earned. You must have enough earned income to cover your contribution to an IRA and cannot put more into your IRA account than what you’ve earned. For example, if you earned $2,000 that year, you can contribute a maximum of $2,000.
Some types of income don’t count as earned income, including:
- Child support
- Income from rental property
- Interest and dividends from investments
- Pay you received while an inmate in a penal institution
- Retirement income
- Social Security
- Unemployment benefits
Another benefit to consider is that your IRA contributions may also be tax-deductible. If you and/or your spouse do not have a retirement plan at work such as a 401(k), you can deduct the full contribution to your traditional IRA on your tax return no matter how much you earn.
For 2021 IRA contributions, the amount of income you can have and still get a full or partial deduction rises from 2020. Singles with a modified adjusted gross income of $66,000 or less and joint filers with income of up to $105,000 can deduct their full contribution for the 2021 tax year. Deductions decrease and phase out completely once income reaches $76,000 for singles and $125,000 for joint filers.
Talk to your financial advisor for further assistance with IRA contributions or questions. Don’t wait until it’s too late to contribute to your IRA for 2021.