In 2020, the maximum contribution amount for an IRA is fixed at $6,000, but this extends to $7,000 if you’re over the age of 50. The maximum contribution for 2015, 2016, 2017, and 2018 was $5,500, increasing to $6,500 for those over 50.
Keep reading to learn more about contributions to and deductions from traditional IRAs and ROTH IRAs.
Do Income Limits Apply?
Income limits do not apply to traditional IRAs, but they do apply to ROTH IRAs. If you are a single filer, you can make a full contribution if your modified adjusted gross income is less than $124,000, which is an increase of $2,000 from the previous year.
A partial contribution is allowed in 2020 if your adjusted gross income is greater than $124,000 but less than $139,000. These figures change if you are married and filing jointly or separately.
What is Adjusted Gross Income?
You will need to know your adjusted gross income to calculate your contributions.
Your adjusted gross income is simply your gross income (all of your earnings throughout the year) minus specific expenses like student loan payments, and money paid to a retirement account. Simply add your salary, overtime, and other employement income and deduct those qualifying expenses.
Are There Age Limits?
Before 2020, an individual could not contribute after they passed 70.5 years. This rule was removed on the first of January 2020 following the 2019 SECURE Act. Everyone who works and earns will contribute, regardless of how old they are.
Is an IRA Contribution Tax Deductible?
You can deduct traditional IRA contributions in full if you and your spouse are not covered by a retirement plan at work. ROTH IRA contributions, however, are not deductible.
Can I Contribute if I Also Have a Retirement Plan at Work?
If you already contribute to an employee retirement plant, including a SIMPLE IRA, you can still contribute to a traditional IRA and ROTH IRA. However, if you or your partner have an employee plan and exceed specific income limits, you may not be allowed to deduct all of your contributions.
How Much Can I Contribute to a Spouse’s IRA?
You and your spouse can each have your own IRAs if you file separate tax returns. Your total contributions cannot exceed the lesser of your total joint taxable income or twice the annual contribution limits on these accounts. Other income limits may also apply.