The tax filing deadline is fast approaching, which means time is running out to fund an IRA for 2023. If you had earned income last year, you may be able to contribute up to $6,500 for 2023 ($7,500 for those age 50 or older by December 31, 2023, $1,000 of which is considered a catch-up contribution) up until your tax return due date, excluding extensions. For most people, that date is Monday, April 15, 2024. 

You can contribute to a traditional IRA, a Roth IRA, or both. Total contributions cannot exceed the annual limit or 100% of your taxable compensation, whichever is less. You may also be able to contribute to an IRA for your spouse for 2023, even if your spouse had no earned income. 

Traditional IRA contributions may be deductible
If you and your spouse were not covered by a work-based retirement plan in 2023, your traditional IRA contributions are fully tax deductible. If you were covered by a work-based plan, you can take a full deduction if you're single and had a 2023 modified adjusted gross income (MAGI) of $73,000 or less, or married filing jointly with a 2023 MAGI of $116,000 or less. You may be able to take a partial deduction if your MAGI fell within the limits below. You may not take any deduction if your MAGI is above the upper limits here: 

• Single/Head of household $73,000 - $83,000 
• Married filing jointly $116,000 - $136,000
• Married filing separately $0 and $10,000 

If you were not covered by a work-based plan but your spouse was, you can take a full deduction if your joint MAGI was $218,000 or less, a partial deduction if your MAGI fell between $218,000 and $228,000, and no deduction if your MAGI was $228,000 or more. 

Consider Roth IRAs as an alternative
 If you can't make a deductible traditional IRA contribution, a Roth IRA may be a more appropriate alternative. Although Roth IRA contributions are not tax-deductible, qualified distributions are tax-free. You can make a full Roth IRA contribution for 2023 if you're single and your MAGI was $138,000 or less, or married filing jointly with a 2023 MAGI of $218,000 or less. Partial contributions may be allowed if your MAGI fell within the limits below. You may not contribute to a Roth IRA if your MAGI is above the upper limits here:  

• Single/Head of household $138,000 - $153,000
• Married filing jointly $218,000 - $228,000
• Married filing separately $0 - $10,000  

Tip: If you can't make an annual contribution to a Roth IRA because of the income limits, there is a workaround. You can make a nondeductible contribution to a traditional IRA and then immediately convert that traditional IRA contribution to a Roth IRA. (This is sometimes called a backdoor Roth IRA.) Keep in mind, however, that you'll need to aggregate all traditional IRAs and SEP/SIMPLE IRAs you own — other than IRAs you've inherited — when you calculate the taxable portion of your conversion. 

A qualified distribution from a Roth IRA is one made after the account is held for at least five years and the account owner reaches age 59½, becomes disabled, or dies. If you make an initial contribution — no matter how small — to a Roth IRA for 2023 by your tax return due date, and it is your first Roth IRA contribution, your five-year holding period starts on January 1, 2023. 

If you are unsure if your MAGI is below the limit to contribute to a Roth IRA for the current year, a good best practice would be to wait until the tax deadline in the following year to make a prior year contribution as well. 

CNB Wealth Management is here to help. Reach out to your Relationship Manager for assistance and guidance regarding prior year contributions. Many taxpayers are unaware that they can make a prior year contribution to a Traditional or Roth IRA. If you can make a deductible Traditional IRA contribution, you’ll save some money on taxes, too.