The last chance to contribute to a 2021 traditional or Roth individual retirement account (“IRA”) is April 18, 2022, which is also the tax-filing deadline for most Americans.
With that tax deadline approaching, contributing to a traditional IRA may be a good way to trim your tax bill. For a 2021 deduction, you can contribute up to $6,000, or $7,000 if you’re age 50 or older, provided you’ve earned that much from a job. These IRA contribution limits are per taxpayer, not per IRA account. Any IRA contribution would need to be designated for 2021 to the financial institution if your intent is to make a 2021 contribution.
These contribution limits apply to all IRA accounts for an individual taxpayer. This means that a single taxpayer could split up to $6,000 between their Roth IRA and traditional IRA. A married couple could invest up to $12,000 in their combined accounts.
While it’s easy to see the appeal of a lower tax bill, the federal tax rate for many Americans is at the lower end of historical ranges. The current rates, enacted by former President Trump’s tax overhaul, are scheduled to sunset after 2025, which could trigger higher tax rates for many Americans in 2026 and beyond. It’s possible that post-tax IRA contributions may also be worth exploring due to these historically low federal tax rates.