By Katherine Vessenes, JD, CFP®

Today’s podcast episode is important to keep in mind as we hurdle closer to that fateful day–Tax Day. Have you funded your traditional deductible IRA for 2023 yet? We’re going to go over 4 rules for funding IRAs and filing taxes. If you are a resident or fellow, or have children who are working, pay special attention!

Not all doctors can claim their IRA contributions as tax deductions because they either make too much money or they have a retirement plan at work like a 401K/403B. If you, or maybe even your spouse, have a retirement plan at work and you exceed certain income limits, your ability to deduct an IRA is going to be limited. If you do not have a retirement plan at work, you can deduct your contribution, no matter how much your income is.

For example, there might be a few doctors out there making around $400,000 a year for a small practice that does not have a retirement plan. If that's the case, they can still deduct a Traditional IRA.

For 2023, the limits are $6,500 if you're under 50 years of age. If you're over 50, you can deduct $7,500. These limits increase in 2024 to $7,000 and $8,000.

Your ability to claim these deductions is based on your Modified Adjusted Gross Income (MAGI). If you are single and your MAGI is less than $73,000 for 2023, you can deduct the full amount of $6,500. On the other hand, if you're married (filing jointly) and your MAGI is less than $116,000 you can also take a full deduction. If you have any questions about whether or not you are under the limit, make sure that you check with your tax professional. Keep in mind Roth IRA contributions are never deductible.

Let’s get into the rules:

Rule #1: No Extensions on IRA Funding

While you can get an extension on filing your taxes, you cannot get an extension on funding your IRAs. All funding for 2023 must be completed by April 15, 2024. This is the same for Traditional IRAs and Roth IRAs.

Rule #2: Filing Before Funding

On the other end of things, if you want to file early, but haven’t finished your contributions for 2023 yet, you can do so. When filing, you claim the deduction based on what you will fund for 2023 before April 15, 2024. Just make sure to work with your financial professionals to get the funding done properly and on time.

Note: If you didn't deduct it on your tax returns, you probably are going to need to file an amended return. This might be a good thing to do because you still could be saving money on your taxes, even though it might cost you a little bit to file an amended return.

Rule #3: Using Spousal Income to Fund

Spouses are able to contribute to each other’s IRAs. This is most important for families where one spouse works outside the home and the other is a homemaker. If the spouse working outside of the home has taxable income for 2023, they can make a spousal contribution to the other spouse’s IRAs. Talk with your CPA or advisor to make sure you are following the proper limits for these contributions.

Rule #4: No Age Limits to Fund

Before the SECURE act, there was an age limit for contributing to Traditional IRAs, but this was changed and now both Roth and Traditional IRAs allow contributions at any age. The only limiting factor is that you must have income in 2023 to fund for 2023.

This could be incredibly important. As more and more doctors are doing side gigs into their 70s and 80s, they could still be doing deductible IRA funding.

Whether you've already funded for 2023 or you are still planning to do so, you should be aware of these rules. If you have questions about how these rules could impact you or whether you still need to fund your IRA, please reach out to us or your tax professional. If you're unsure whether you have funded yet for 2023 and are a client at MD Financial, you can reach out to us at any time, and we'll confirm whether you've made that contribution or not.

Follow us on social media so you don’t miss out on any important updates. Feel free to reach out with questions. We always welcome your questions and topic suggestions for future episodes. If you’d like a second opinion on your financial health, you can do that by emailing us at info@mdfinancialadvisors.com.

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Katherine Vessenes, JD, CFP®, is the founder and CEO of MD Financial Advisors who serve 500 doctors from Hawaii to Cape Cod. An award-winning Financial Advisor, Attorney, Certified Financial Planner®, author and speaker, she is devoted to bringing ethical advice to physicians and dentists. She can be reached at Katherine@mdfinancialadvisors.com.