What Are the Contribution Limits for IRAs?

Written by: John Landers

The tax codes allow anyone who meets the eligibility requirements to contribute to an Individual Retirement Account (IRA) to receive the benefits of tax deductions and/or the ability to grow earnings tax-free.  As long as you opened your IRA by December 31, 2012, you have until April 15, 2013 to make your IRA contribution for the 2012 tax year and possibly receive a tax deduction on traditional IRA accounts. To take advantage of this provision in the tax codes, it helps to understand the contribution limits for IRAs.

Maximum contribution limits for IRAs

Internal Revenue Service tax codes allow you to contribute a maximum of whichever is the smaller of the following to your traditional and/or Roth IRA accounts:

  • $5,000 contribution or
  • “Catch-up” contribution of $6,000 if you’re age 50 or older
  • Your taxable income for the year

For 2013 the maximum allowable contribution amount increases:

  • $5,500 contribution or
  •  “Catch-up” contribution of $6,500 for taxpayers age 50 or older
  • Your taxable income for the year

Roth IRA

Since the Roth was introduced in 2002, the contribution limits has increased 66%, from $3,000 to $5,000 for the 2012 tax year. However, unlike the traditional IRA, the Roth IRA contribution limit depends on the taxpayer’s filing status and income.

The following table shows the filing status, modified adjusted gross income (MAGI) and the maximum contribution you can make to a Roth IRA for your 2012 tax return.

 

Filing Status

Modified AGI

Allowable Contribution
married filing jointly or qualifying widow or widower  $173,000- $183,000 up to the maximuma reduced amountzero
married filing separately and you lived with your spouse at any time during the year 0- $9,999 a reduced amountzero
single, head of household, or married filing separately (you did not live with your spouse at any time during the year) $110,000- $125,000 up to the maximuma reduced amountzero

 

Calculating your reduced contribution

  1. Begin with the modified adjusted gross income. MAGI  consists of your adjusted gross income plus added back items, such as student-loan deductions, deductions for higher-education expenses, IRA-contribution deductions, and foreign income and foreign-housing deductions.
  2. Subtract from the MAGI one of the following amounts:
    1. $173,000 if filing a joint return or qualifying widow or widower,
    2. $-0- if married filing a separate return, and you lived with your spouse at any time during the year, or
    3. $110,000 for all other individuals
  3. Divide the result on line 2 by $15,000 or $10,000 if you are filing a joint return, qualifying widow or widower, or married filing a separate return
  4. Multiply the maximum contribution limit by the result on line 3.
  5. Subtract the result on line 4 from the maximum contribution limit

The result is the reduced contribution you can make to your Roth IRA for the 2012 tax year.

Deductions limits

Contributions to a Roth IRA are not tax deductible. You may qualify to deduct all or a portion of your contributions for a traditional IRA. If you or your spouse participate in a retirement plan at work and exceed income restrictions your deduction will fall below the maximum allowed.

See the Internal Revenue Service’s Publication 590, Individual Retirement Accounts (IRAs), for more information.


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What Are the Contribution Limits for IRAs?

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