Get Ready for 2018 Contributions, but Don’t Forget 2017 Prior-Year Contributions
Updated on April 27, 2018
As a financial organization sponsoring individual retirement arrangement (IRA) and health savings account (HSA) programs, your traffic picks up soon for contributions. Individuals can start making 2018 contributions, but preparing their 2017 income tax returns often prompts them to make prior-year contributions. Eligible individuals may make prior-year contributions—2017 contributions—until their federal income tax return due date, excluding extensions. For 2017 contributions, that deadline for most individuals is April 17, 2018.
Financial organizations can expect to get questions on both 2017 and 2018 eligibility limitations and contribution limits. While you should advise individuals to see a competent tax advisor for their specific questions, you may want to answer the basic questions. Use these charts below as a quick reference to 2017 and 2018 contribution and eligibility limits.
Traditional and Roth IRA Contribution Limits
Eligible individuals may contribute 100 percent of their eligible compensation (generally earned income) up to the statutory maximum amount per year. The annual IRA contribution limit is increased for individuals who are age 50 or older by a catch-up amount. An individual is subject to this limit (regular, and if eligible, catch-up contributions) for all of his Traditional and Roth IRAs in aggregate.
Roth IRA Eligibility and Traditional IRA Deductibility
An individual’s eligibility to contribute to a Roth IRA depends on his tax filing status and modified adjusted gross income (MAGI). If his MAGI exceeds certain amounts, he may be eligible for a smaller Roth IRA contribution or might not be eligible for any contribution.
If an individual (or spouse) is an active participant in an employer-sponsored retirement plan, Traditional IRA deductibility depends on tax filing status and MAGI. If active participation is not an issue, the individual’s Traditional IRA contribution is fully deductible. See the following table for details.
For other IRA and employer-sponsored retirement plan limitations, see “IRA Announces 2018 IRA and Retirement Plan Limitations” at ascensus.com.
HSA Contribution and HDHP Limits
The statutory annual contribution limit for HSAs depends on whether the HSA owner has self-only or family high deductible health plan (HDHP) coverage. Like IRAs, the contribution limit is increased for individuals who are age 55 or older by a catch-up amount. The annual limit includes contributions to all HSAs owned by the individual in aggregate.
HSA-compatible high deductible health plans (HDHPs) are defined by certain minimum deductible amounts and maximum out-of-pocket expense amounts. If a health plan does not meet these limits, the covered individuals will not be eligible for HSA contributions. See the following table for details.
For information about IRA contributions, refer individuals to IRS Publication 590-A, Contributions to Individual Retirement Arrangements, and to IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans, for more information on HSA contributions.