Q

Should I make a contribution for my 2017 or 2018 IRA?

A

It really depends.

If you plan to contribute to a traditional IRA or SEP IRA before you send your 2017 taxes off the IRS, you have an important decision to make. Traditional and SEP IRA contributions are pre-tax, meaning that you won’t pay income tax on any contributions you make — those under 50 can to contribute up to $5,500 to a traditional IRA, and considerably more (up to $55,000) to a SEP.

So you are free to choose whether your IRA contributions will offset your 2017 or 2018 taxable income. The answer in the vast majority of cases is carpe diem, seize the day and absolutely take advantage of any room you have in 2017 retirement accounts before looking towards 2018, since you’ll be losing out on those 2017 tax-deferral benefits a full year before the 2018 opportunities go away. Naturally, if you’ve already maxed out on your 2017 contributions, go ahead and get started on 2018. But this stuff can get complicated, for instance, if you anticipate a major income spike in 2018. In a case like this, you may want to consult an accountant on specific issues of tax brackets and tax liability.

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