Traditional IRA and Roth IRA Contribution Limits
Traditional and Roth IRA Structure
Traditional and Roth IRAs both provide for tax-deferral. Tax-deferral means that you will not be responsible for paying taxes on interest income, dividend payments, and capital gains as they occur within your retirement account. A Traditional IRA features tax-deductible contributions, where your withdrawals are taxed as ordinary income. Roth IRA contributions, however, are made with after-tax money, which generally allows for tax-free withdrawals. With both accounts, you may be subject to a 10 percent additional tax penalty on early withdrawals made before age 59 ½.
General Contribution Limits
For the 2011 tax year, you can generally make $5,000 worth of annual contributions into Traditional and Roth IRAs combined as a single filer. For a married couple, each spouse can put $5,000 towards IRAs for a total household amount of $10,000. Traditional and Roth IRA contribution limits are increased by $1,000, if you are at least 50 years old by the end of the tax year. You would then be able to make $6,000 and $12,000 in contributions as part of a single and married household, respectively.
Modified Adjusted Gross Income Limits
Be advised that Traditional and Roth IRA contribution limits are phased down as your modified adjusted gross income increases. As a single filer, your Roth IRA contributions are limited if you report at least $107,000 in modified adjusted gross income for the year. You cannot make any Roth IRA contributions if you report at least $122,000 worth of modified adjusted gross income as a single filer. For married filing jointly couples, Roth IRA contribution limits are reduced when combined MAGI is at least $169,000.
Traditional IRA contribution and deduction limits vary according to modified adjusted gross income and whether you are covered by a retirement plan through your employer. As a single filer with a retirement plan through work, your Traditional IRA deduction limits begin to get phased out at $56,000.01 worth of reported modified adjusted gross income. In this scenario, you cannot make a deduction for any IRA contribution, if your MAGI is at least $66,000. As a single filer with no retirement plan at work, however, you may deduct your full IRA contribution limit from your taxable income, regardless of the amount of money that you make.
Traditional IRA and Roth IRA Contribution Limits, Sources:
IRS: 2011 IRA Contribution and Deduction Limits
IRS: Publication 590 - Individual Retirement Arrangements
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- You can generally make $5,000 worth of annual contributions into Tradtional and Roth IRAs, combined.
- Traditional and Roth IRA contribution limits are phased down as your income increases.