When is the IRA contribution deadline?

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In a Nutshell

Saving money in an IRA can help build your nest egg for the future and reduce your tax burden now. So there’s no time like the present to get up to speed on how IRAs work — and when the IRA contribution deadline is for 2018.

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It can be all too easy to put off getting your financial ducks in a row for retirement, especially if you’ve just started on your career path and retirement is decades away.

But you’ll thank yourself later if you get started now. One strategy is to open an individual retirement account, which you can use to save for retirement while enjoying certain tax breaks along the way. If you already contribute to an employer-sponsored 401(k) retirement plan, you can also put money into an IRA. And you may be able to deduct the IRA contributions from your taxable income, which can reduce your overall income tax bill.

The government limits how much you can invest in these tax-advantaged IRAs each year, but the good news is that it offers an extended IRA contribution deadline. You have until April 15, 2019 — the deadline to file your 2018 federal tax returns — to contribute for the 2018 tax year and maximize your annual tax break as well as your future savings.

What is an IRA?

An IRA — also known as an individual retirement arrangement — is a kind of savings account that offers tax benefits as an incentive to help you save for retirement. The money you contribute may be partially or entirely tax deductible, depending on your situation, and you don’t pay tax on the interest earned while the money is in your account. You only pay tax when you withdraw money from your IRA, assuming it’s a traditional IRA (more on that in a moment).

You can open the account on your own through a stock broker, bank or other financial institution. You have the option of managing the account’s funds on your own, choosing which stocks, bonds and mutual funds to invest in. If you wish to withdraw the accumulated funds without incurring a penalty, you have to meet certain requirements.

There are four major types of IRAs into which you can deposit pretax or after-tax dollars.

Traditional IRA: This type of account offers upfront tax benefits, allowing you to deposit pretax and to make tax-deferred investments. You may be able to deduct all or some of your IRA contributions if you meet certain requirements and deposit the funds by the IRA contribution deadline for the tax year.

Roth IRA: With a Roth IRA, you contribute after-tax dollars. This, of course, means none of your contributions are tax-deductible — so a Roth IRA retirement account won’t help to reduce your taxable income, and potentially lower your tax bill, in the same way a traditional IRA can. Instead, you get the tax benefit down the road: Qualified distributions from a Roth IRA are tax-free, meaning if you make a qualified withdrawal from your Roth (such as when you retire), you won’t pay any tax on the money at that time. There are also other differences between traditional and Roth IRAs.

Simple IRA: A Savings Incentive Match Plan for Employees is a type of traditional IRA that allows both employees and employers to contribute to employer-sponsored IRAs set up for employees. Small businesses with fewer than 100 employees typically use this IRA.

SEP IRA: A Simplified Employee Pension plan allows businesses and self-employed people to contribute up to 25% of an employee’s pay to an individual retirement account set up for each employee. Only an employer can contribute to an employee’s SEP IRA.

For the purposes of this article, let’s focus on traditional IRAs, how they work and the deadline for making contributions that will count toward your 2018 taxes.

Who can open a traditional IRA?

You can open a traditional IRA if you or your spouse (if you file a joint return) received taxable compensation during the year, such as wages or income from work, and if you are younger than 70½ by the end of 2018.

If you’re married and you and your spouse both fulfill these conditions, you each can open separate accounts, not a joint IRA. Employed spouses also can contribute to the IRA of their nonworking spouses, with limitations.

You can open an IRA at a bank, brokerage firm, insurance company or other financial institution. Many companies also allow employees who enroll in a retirement plan to designate how much they’ll contribute to a traditional IRA via a payroll deduction.

Tax benefits of a traditional IRA

Only 53% of American working-age families participate in a retirement plan, according to a 2013 report from the Economic Policy Institute. And the average retirement account savings for families is just under $96,000, the institute reports — a far cry from the $1 million financial experts often cite as the figure you need to retire comfortably.

So it’s important to save as much as you can, especially when you have a tax-advantaged way of doing it through IRAs.

With a traditional IRA, you may be able deduct qualified contributions to reduce your taxable income. You also benefit from tax-deferred growth of your investments in an IRA account: Your contributions — and earnings on these contributions — aren’t taxed until you withdraw them.

The amount of income tax you’ll pay when you withdraw the money will depend on your tax bracket and age at the time of withdrawal. Generally, if you withdraw money from your traditional IRA before you’re 59½, you’ll pay an additional 10% tax. If you wait until you retire to begin making withdrawals from your traditional IRA, your investments and other sources of income (such as Social Security or income from a rental property) may be less than when you were working, and you could be in a lower tax bracket than you were during your working years. This could help you save taxes on your retirement income and keep more of your savings.

Traditional IRA contribution and deduction limits

The IRS sets contribution and deduction limits for IRAs every year. The contribution limit determines the total dollar amount you can put into your retirement account during the year, while the deduction limit determines the portion of this money that you can deduct to reduce your taxable income.

Contribution limits for traditional IRAs

For 2018, you can contribute a total of up to $5,500 to all your IRAs — both traditional and Roth if you have them — if you are younger than 50. If you’re 50 or older, you can make a catch-up contribution of an additional $1,000, bringing your annual contribution limit to $6,500. But you can’t contribute to a traditional IRA if you’re 70½ or older.

Deduction limits for traditional IRAs

The deduction amount you can take depends on your modified adjusted gross income, or MAGI, as well as your filing status and whether you or your spouse are covered by a workplace retirement plan such as a 401(k). Income phaseouts apply.

If you’re covered by a retirement plan at work, here’s what you can deduct — or not deduct — for the 2018 tax year:

Filing status Full deduction up to contribution limit based on MAGI limits of … Partial deduction based on MAGI limits of … No deduction if your MAGI is …
Single or head of household $63,000 or less More than $63,000 but less than $73,000 $73,000 or more
Married filing jointly or qualifying widow(er) $101,000 or less More than $101,000 but less than $121,000 $121,000 or more
Married filing separately Not eligible Less than $10,000 $10,000 or more


If neither you nor your spouse participated in a workplace retirement plan — such as a 401(k) — you can deduct the full amount of your contributions.

Just make sure you don’t exceed your IRA contribution limit for the year. If you exceed your contribution limit, the IRS will impose a 6% tax each year on the excess above $5,500 that you put into your IRA, or $6,500 if you’re 50 or older. For example, if your contribution limit is $5,500, it may be in your best interest to stick to this number or to withdraw any excess contributions before the April tax filing deadline so you can avoid this penalty.

If you exceeded your contribution limit, you must report it on Form 5329 and file it along with your annual tax return. And if you aren’t able to deduct any portion of the amount you contributed to a traditional IRA, you need to file Form 8606.

When is the IRA contribution deadline for 2018?

As mentioned earlier, many employers will allow you to redirect money from your paycheck into your traditional IRA throughout the year. Automating your contributions is a great way to ensure your retirement saving stays on pace throughout the year. It can help you make the maximum allowable contribution — and reap the maximum tax deduction you’re allowed.

However, if you didn’t contribute to your IRA throughout the year, there’s still time to make contributions that can count toward your 2018 federal income taxes. You have until April 15, 2019 — the deadline for filing and paying your 2018 federal income taxes — to make an IRA contribution that can count for 2018.

Bottom line

IRAs help you grow your retirement nest egg, boosting your savings to give you a chance to enjoy the same — or close to the same — quality of life in your golden years as you have during your working years.

Unfortunately, most Americans don’t take full advantage of these tax-advantaged accounts. If you haven’t yet funded your traditional and Roth IRAs to the contribution limit ($5,500 total for most people younger than 50), use the next few months to make sure you hit your contribution limit by April 15. You could increase your payroll deduction, transfer money from a low-interest savings account or find places to cut your budget and use the extra funds to maximize your IRA contributions.

But don’t overdo it. If you contribute more than your limit, you could face a tax of 6% per year for as long as the excess money remains in your IRA. Instead, withdraw the excess amount and any income it earned by April 15 to avoid the excess tax.