Updated for 2015: One of the best ways to save for retirement is with an Individual Retirement Arrangement, or IRA. Because of the great tax advantages, the IRS places maximum contribution limits on IRAs. These caps are set by Congress, and can change from time to time. The IRS recently announced the 2015 Traditional and Roth IRA contribution limits. There is no change to the contribution limits from 2014. There were, however, some changes to the income limits for deductions for Traditional IRAs, and changes to the Roth IRA income eligibility limits. This article covers all you should need to know about 2014 IRA Contribution and Deduction Limits.
Traditional and Roth IRA Contribution Limits
The Traditional and Roth IRA contribution limits are $5,500 for those under age 50. Persons age 50 and over can make additional catch up contributions of $1,000, for a total contribution limit of $6,500. You can have both a Roth IRA and a Traditional IRA in the same tax year, but you can’t exceed the contribution limit with your combined contributions to both accounts. Self-employed retirement plans may have different rules, so be sure to read up on the different self-employment tax plans or check with your accountant or financial advisor.
IRA Contribution Limits
|Tax Year||Contribution Limit Age 49 & Below||Catch-up Contribution Limit Age 50 & Above||Contribution Limit Age 50 & Above|
Traditional IRA Deductions and Roth IRA Phase outs
The IRS has specific rules regarding who can contribute to an IRA. Traditional IRAs and Roth IRAs base certain eligibility guidelines on the taxpayer’s Modified Adjusted Gross Income (MAGI), which is calculated when you file your taxes.
Traditional IRA Deductions. Traditional IRA contributions are 100% tax deductible if you make less than the IRS deductibility phase out level (less $61,000 if you are single, or less than $98,000 if you are married filing jointly). Tax filers can deduct a lower portion of their Traditional IRA contribution starting at $61,001 and can no longer deduct any of their contribution when they earn $71,000 or more. The phase out range for married filing jointly is between $98,000 and $118,000.
Roth IRA phase out. Like the Traditional IRA, the IRS has phase out rules for Roth IRA contributions. Tax filers will be able to contribute the maximum amount to their IRA if they don’t exceed certain income limits.
- Single, Head of Household, or Married Filing Separately can contribute the maximum if their MAGI is $116,000 or less. Contribution rates phase out beginning at a MAGI above $116,001, and end at $131,000 (up from $114,000, and $129,000, respectively in 2014).
- Married Filing Jointly can make maximum Roth IRA contributions for an income of $183,000 or less. Roth IRA eligibility ends at $193,000. (up from $181,000 and $191,000, respectively in 2014).
These income limits apply to everyone, regardless of age, however, those age 50 and above can contribute an additional $1,000 per year as catch-up contributions. You only need to be age 50 or older for one day during the calendar year to be eligible for the catch-up contributions.
For specific questions, please see IRS Pub 590.
IRA Contribution Deadlines
You can make IRA contributions for the previous tax year up to the tax filing deadline of the current year. For example, you can make a contribution for the 2014 tax year until April 15, 2015. If you make an IRA contribution between January 2 and the tax deadline, you should designate which tax year your contributions are for, as you can also contribute to current year IRAs during the same time frame. Here are some recommendations for opening a Roth IRA.