It's Not Too Late to Make a 2018 IRA Contribution


Have you made your 2018 self-directed IRA contribution yet? It’s not too late. You can contribute up to $5,500 ($6,500 if you are 50 or older) to your traditional and Roth IRAs for 2018. And you have  up until your 2018 income tax return due date, generally April 15, 2019, to make the contribution.

Reasons to Contribute to Your IRA (besides saving for retirement)

Build Liquidity to Pay Investment Expenses

Many account owners use their self-directed IRAs to purchase alternative investments that have ongoing expenses. Expenses related to a real estate investment, for example, may include property insurance, taxes, utilities, and maintenance and management fees. The IRA must also maintain sufficient cash or liquidity to cover fees and expenses related to investments. All payments must come from the IRA. They cannot be paid from the IRA owner’s personal account. If most of your IRA assets are tied up in illiquid investments, making an annual contribution can help provide the cash needed to pay the expenses that must be paid by the IRA.

Take a Tax Deduction

With the tax laws changes first effective in 2018, many taxpayers aren’t sure whether they’ll end up owing more tax than in prior years. One thing that hasn’t changed is the option to reduce your tax liability by making a deductible IRA contribution to a traditional IRA. You may take a tax deduction if you are under age 70½  and do not participate in an employer’s retirement plan. If you do participate in an employer’s retirement plan, or you have a spouse that does, your adjusted gross income must fall within certain limits to be eligible for the deduction.

You can claim the deduction on your tax return before you physically deposit the contribution – as long as you actually make the contribution.

Build Tax-Free Savings

If your adjusted gross income exceeds the limits for being eligible to take a deduction, you may make a nondeductible contribution to your traditional IRA for 2018. Although you won’t get a tax break for contributing to your IRA this year, you will benefit when you withdraw assets from your traditional IRA. You won’t have to pay tax on those dollars when you withdraw them from the IRA. This can help provide you with nontaxable retirement income.

Grow Tax-Free Investments

You may also be eligible to make a Roth IRA contribution in addition to or instead of a traditional IRA contribution for 2018. Roth IRA contributions are never tax deductible, but, like nondeductible traditional IRA contributions, they are always distributed tax-free. Another benefit of making Roth IRA contributions is that if you wait until you’re at least 59½ to tap into the investment earnings portion of your Roth IRA (and you’ve had a Roth IRA for at least five years), you won’t pay any tax on the growth of your investments in any of your Roth IRAs (also true if you become disabled or die).

Remember to Do the Paperwork

If you make an IRA contribution for 2018 now, inform your IRA custodian that you are making a 2018 contribution. Otherwise, your custodian may assume that you are contributing for the current year – 2019 – and you will lose out on the option to make a 2018 contribution as well as reducing the amount you are eligible to contribute for 2019.  


If you make a nondeductible contribution to a traditional IRA, you will need to file Form 8606, Nondeductible IRAs, with your tax return to track the after-tax (basis) in your IRA. This will ensure that you won’t be paying tax on those assets again when you remove them from the IRA.

If you receive a tax refund this year, you can contribute the refund (or a portion of the refund), directly into your traditional IRA or Roth IRA. For more information on this option, see the instructions for Form 8888, Allocation of Refund, before you file your tax return.

Contribute for 2019, Too

Even if you make an IRA contribution for 2018 in 2019, you can still make a 2019 IRA contribution up until your 2019 income tax return due date, generally April 15, 2020. The contribution limit for 2019 is $6,000 ($7,000 if you’re 50 or older).

If you receive a year-end bonus from work or a tax refund, or you have been diligent about saving throughout the year, think about investing that money to work for you in a self-directed IRA. If you’re 50 or older, for example, you could deposit up to $13,500 in your IRAs just by making contributions for the 2018 and 2019 tax years.

To learn more about IRA contributions

Visit Mainstar Trust at to find out how to make a contribution to your Mainstar Trust IRA or how to open a Mainstar Trust IRA.
Contact the Mainstar Trust team at 1-800-521-9897 or