You may not have noticed that the IRA contribution and income limits increased for 2013 thanks to wall-to-wall coverage of the fiscal cliff.
The annual IRA contribution limit increased as a result of inflation (officially called cost-of-living adjustments or COLAs). For 2013, the maximum IRA contribution is now $5,500 if you are younger than age 50 or $6,500 if you are age 50 or older during 2013. For 2012, the limit was $5,000 ($6,000 if you were age 50 or older during the year). In order to make an IRA contribution for the year, you must have compensation or wages.
There is no income limit to make a Traditional IRA contribution. However, if you want to get a tax deduction for your Traditional IRA contribution, there are income limits if you or your spouse is covered by a retirement plan for the year.
For example, if both you and your spouse are covered by employer plans for 2013, you still get a tax deduction for your IRA contributions if your combined MAGI (modified adjusted gross income) is less than $95,000. You would not get a deduction if your MAGI is above $115,000. If your MAGI is between $95,000 and $115,000, you get a partial tax deduction. See IRS Publication 590 on the IRS website, www.irs.gov for all of the limits if you are single, married filing separately, and other information.
If you are considering making a Roth IRA contribution for 2013, you need to be aware that there are income limits that can reduce or eliminate your ability to make these contributions. For example, if you are single and your total income is below $112,000 for 2013, you can make a full Roth IRA contribution of $5,500 or $6,500 depending on your age. However, if your MAGI is above $127,000, you not allowed to make a Roth IRA contribution. Finally, if your MAGI is between $112,000 and $127,000, you can make a partial Roth contribution.
If you are married and file a joint federal income tax return, you and your spouse can make a full Roth IRA contribution if your combined MAGI is below $178,000 for 2013. However, if your MAGI is above $188,000, you cannot make Roth IRA contributions. If your MAGI is between $178,000 and $188,000, you can make partial Roth IRA contributions. Roth IRA contributions are never tax-deductible.
NOTE: These limits are per individual, not per type of account. Your total contribution to all IRAs, Roth and Traditional, but not including SEPs and SIMPLEs, is $5,500 for 2013 or $6,500 if you are age 50 or older. You cannot put $5,500 into a Traditional IRA and an additional $5,500 into a Roth IRA.
- By Joe Cicchinelli and Jared Trexler
- For 2013, the maximum IRA contribution limit increased from $5,000 to $5,500 if you are younger than age 50 (or from $6,000 to $6,500 if you are age 50 or older during 2013).
- Income limits for contributing to a Roth IRA or for deducting Traditional IRA contributions also increased for 2013.