Feb 28, 2021
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About this Deal
you can make a prior-year traditional IRA contribution and reap the benefits now and in retirement. Here's a closer look at how it works and what kind of a difference it can make for your taxes.
What's a prior-year IRA contribution?
A prior-year IRA contribution is a contribution you make to your IRA for the previous year -- in this case, 2020. You can do this at any point up until the April 15 tax-filing deadline, although if you've already filed your taxes and then decide you'd like to make a prior-year contribution, you must file an amended tax return, or the government won't give you the tax break you deserve.
A traditional IRA contribution makes the most sense if you want a tax break this year because these contributions reduce your taxable income. You could also put money into a Roth IRA if you prefer. These accounts are usually better if you believe you're in a lower tax bracket now than you will be in retirement. But you pay taxes on these contributions now in exchange for tax-free distributions later, so Roth IRA contributions won't help you save any money this year.