There’s still time to contribute to your IRA for 2015

There’s still time to make a regular IRA contribution for 2015! You have until your tax return due date (not including extensions) to contribute up to $5,500 for 2015 ($6,500 if you were age 50 by Dec. 31, 2015). For most taxpayers, the contribution deadline for 2015 is April 18, 2016, but it’s April 19, 2016, if you live in Maine or Massachusetts.

You can contribute to a traditional IRA, a Roth IRA, or both, as long as your total contributions don’t exceed the annual limit (or, if less, 100 percent of your earned income). You may also be able to contribute to an IRA for your spouse for 2015, even if your spouse didn’t have any  income last year.

Traditional IRA

You can contribute to a traditional IRA for 2015 if you had taxable compensation and were younger than  age 70 1/2 on Dec. 31, 2015. However, if you or your spouse were covered by an employer-sponsored retirement plan in 2015, then your ability to deduct your contributions may be limited or eliminated, depending on your filing status and your modified adjusted gross income (MAGI). Even if you can’t deduct your traditional IRA contribution, you can always make nondeductible (after-tax) contributions to a traditional IRA, regardless of your income level. However, in most cases, if you’re eligible, you’d be better off contributing to a Roth IRA instead of making nondeductible contributions to a traditional IRA.

For those covered by an employer-sponsored plan, here are the 2015 income phase-out ranges for determining deductibility of traditional IRA contributions:

                •             Single/head of household, your IRA deduction is reduced if your MAGI is $61,000 to $71,000; eliminated if your MAGI is $71,000 or more

                •             Married filing jointly, $98,000 to $118,000; $118,000 or more

                •             Married filing separately, $0 to $10,000; $10,000 or more.

If you are not covered by an employer-sponsored retirement plan, but filing a joint return with a spouse who is covered by a plan, your IRA deduction is reduced if your MAGI is $183,000 to $193,000; eliminated if your MAGI is $193,000 or more.

Roth IRA

You can contribute to a Roth IRA if your MAGI is within certain dollar limits, even if you’re 70 1/2 or older. For 2015, if you file your federal tax return as single or head of household, you can make a full Roth contribution if your income is $116,000 or less. Your maximum contribution is phased out if your income is between $116,000 and $131,000, and you can’t contribute at all if your income is $131,000 or more.

Similarly, if you’re married and file a joint federal tax return, you can make a full Roth contribution if your income is $183,000 or less. Your contribution is phased out if your income is between $183,000 and $193,000, and you can’t contribute at all if your income is $193,000 or more. And if you’re married filing separately, your contribution phases out with any income over $0, and you can’t contribute at all if your income is $10,000 or more.

Even if you can’t make an annual contribution to a Roth IRA because of the income limits, there’s an easy workaround.

If you haven’t yet reached age 70 1/2, you can simply make a nondeductible contribution to a traditional IRA, and then immediately convert that traditional IRA to a Roth IRA. Keep in mind, however, that you’ll need to aggregate all traditional IRAs and SEP/SIMPLE IRAs you own – as opposed to IRAs you’ve inherited – when you calculate the taxable portion of your conversion. (This is sometimes called a “back-door” Roth IRA.)

Finally, remember that if you make a contribution to a Roth IRA for 2015 – no matter how small – by your tax return due date, and this is your first Roth IRA contribution, your five-year holding period for identifying qualified distributions from all your Roth IRAs (other than inherited accounts) will start on Jan. 1, 2015.

BARBARA KENERSON is first vice president/Investments at Janney Montgomery Scott LLC and can be reached at BarbaraKenerson.com.