Due to the current coronavirus outbreak, the IRS has pushed back the 2019 IRA contribution deadline. This is line with the extension of tax filing, which was implemented recently. You now have until July 15, 2020 to make contributions to your IRA for the year 2019. The major benefit of this move is that it gives savers an extra three months to lower their tax bill. All qualified contributions made to a traditional IRA lessen your tax bill during the year they are made.
IRA Contribution Limits
For 2019, you are allowed to contribute up to $6,000. Further, if you are at least age 50, you may contribute another $1,000 for a total of $7,000. Therefore, if you haven’t maxed out your IRA, you still have time to do so. Many people are shying away from equities, like stocks for the moment. However, you may contribute cash into an IRA, if the plan allows out. Anything you save now will grow on a tax-deferred basis. Furthermore, if you contribute to a Roth IRA, you will have tax-free income during retirement. Keep in mind, there is no upfront tax break with a Roth.
An IRA contribution is the money that an IRA holder (you) places in your individual retirement account. You can contribute money to any type of IRA, including a Self-Directed IRA. As you may know, contributions create a nest egg until you reach the age of retirement.
The two most common IRAs to invest in are traditional and Roth. But again, you can invest in any type of IRA.
When you make a Self-Directed IRA contribution, you must make it to the IRA administrator/custodian. Contributions cannot go directly to your LLC. However, when it goes to the custodian, the funds then transfer into your IRA LLC.
Thanks to the SECURE Act, as of January 1, 2020, there are no longer age restrictions for contributing to a traditional IRA. Previously, one could not fund a traditional IRA once you reached age 70 1/2.
Why do Maximum Contributions Exist?
The IRS have kept the IRA contributions low to limit the amount of deductions an individual can take on his/her tax return. This is because they want to limit how much you can save for retirement each year. It may sound strange, but the IRA does not want to you leave the funds in your retirement account and build an inheritance.
Providing Less Than the LLC Maximum Contribution
You are entirely within your rights to contribute less than the self-directed IRA LLC maximum contribution. In fact, there’s no requirement to make any yearly contributions to your IRA. However, it’s important to keep in mind that you cannot make up the difference in the following tax year.
Can I Contribute if I’m Covered by a Work Retirement Plan?
If you participate in an employer-sponsored retirement plan, such as a 401(k) or SIMPLE IRA plan, you can still make Self-Directed IRA contributions. However, if your employment retirement plan sponsors both you and your spouse, and your income exceeds certain levels, you may not be able to deduct the full contribution.
What Happens When One Spouse Earns Income?
Many people wonder if they can establish a Self-Directed IRA or IRA LLC if one spouse earns income for the year. You certainly can! Simply file a joint return and you and your spouse can each make IRA contributions.
The amount of your combined contributions must not be more than the taxable compensation on your joint return. Additionally, the combined amount cannot exceed the maximum IRA contributions for the year. It doesn’t matter which spouse earns the compensation.