Invest

how to invest

Live

career, food, travel

Save

saving, credit, debt

Protect

insurance, security

Retire

401K, IRA, FI, Retire

Home » IRA's, Retire, Roth IRA

Traditional & Roth IRA Income Limits

Last updated by on One Comment

This post has been updated for the 2013 and 2014 calendar years.

IRA Income Limits

IRA’s are a phenomenal way to limit your tax liability in the present (Traditional IRA) and in the future (Roth IRA). In fact, the IRS views them as such a benefit that they put rules in place to ensure that if you have too high of an income,  your IRA contribution maximums or deductions will begin to phase out and disappear altogether.

This is where modified adjusted gross income (MAGI) comes into play, which I just wrote about in exhaustive detail (I should have quizzed).

Since it is still before the 2013 tax deadline, it is important to know both the 2013 and 2014 IRA income limits.

IRA’s provide a great way to limit your tax liability in the present (Traditional IRA) and in the future (Roth IRA). There are, however, contribution phaseout limits based on your income that can limit how much you can contribute. The good news is that those limits (tied to inflation) will increase in 2012.

2013 Roth IRA Income Limits

In regards to IRS Roth IRA income limits, your modified adjusted gross income (MAGI) determines whether or not you can contribute to a Roth IRA. Here are 2013 IRA income limits in place, by filing status:

  • Married filing jointly or qualifying widow(er): If your modified gross adjusted income (MAGI) is $178,000 (up from $173,000 in 2012), you can contribute up to the $5,500 max. If at least $178,000 up to $188,000 (both up $5,000 over 2012), your contribution limit is phased out (see IRS publication 590). If $188,000 and above, you cannot contribute to a Roth IRA.
  • Single, head of household, or married filing separately and you did not live with your spouse at any time during the year: If under $112,000 (up from $110,000 in 2012), you can contribute up to the $5,500 maximum. If at least $112,000 up to $127,000 (was $125,000 in 2012), your contribution limit is phased out. If $127,000 and up, you cannot contribute to a Roth IRA.
  • Married filing separately and you lived with your spouse at any time during the year:If MAGI is between $0 and $10,000, your contribution limit will phase out. If $0, you can contribute up to the $5,500 maximum ($6,500 if over 50 years old). If $10,000 and above, you cannot contribute to a Roth IRA.

2014 Roth IRA Income Limits

The 2013 Roth IRA income phaseout limits are as follows:

  • Married filing jointly or qualifying widow(er): If your modified gross adjusted income (MAGI) is $181,000 (up from $178,000 in 2013), you can contribute up to the $5,500 max. If at least $181,000 up to $191,000 (up $3,000 over 2013), your contribution limit is phased out (see IRS publication 590). If $191,000 and above, you cannot contribute to a Roth IRA.
  • Single, head of household, or married filing separately and you did not live with your spouse at any time during the year: If under $114,000 (up from $112,000 in 2013), you can contribute up to the $5,500 maximum. If at least $114,000 up to $129,000 (was $127,000 in 2013), your contribution limit is phased out. If $129,000 and up, you cannot contribute to a Roth IRA.
  • Married filing separately and you lived with your spouse at any time during the year: If MAGI is between $0 and $10,000, your contribution limit will phase out. If $0, you can contribute up to the $5,500 maximum ($6,500 if over 50 years old). If $10,000 and above, you cannot contribute to a Roth IRA.

2013 Traditional IRA Income Limits for Deductions

IRA income limit

There are no income limits dictating what you can contribute to a Traditional IRA. However, their are limits as to what you can deduct from your taxes. And what good are Traditional IRA’s if you can’t get a tax deduction when contributing to them?

Traditional IRA income limits vary based on whether you are covered by a qualified retirement plan at work (i.e. 401K) or not. Let’s divide up the two.

If Covered by an Employer Sponsored Retirement Plan

The 2013 traditional and Roth IRA income limits have both increased.

If you DO HAVE a retirement plan with your employer:

  • Single or head of household: If your MAGI is $59,000 (up from $58,000) or less, you can take a full deduction. If more than $59,000, but less than $69,000 (up from $68,000) – you get a partial deduction. If over $69,000, you cannot take a deduction.
  • Married filing jointly or qualifying widow(er): If your MAGI is $95,000 (up from $92,000) or less, you can take a full deduction. If more than $95,000, but less than $115,000 (up from $112,000) – you get a partial deduction. If over $115,000, no deduction.
  • Married filing separately: If your MAGI is less than $10,000, you can take a partial deduction. If $10,000 or more, no deduction.

If you DO NOT HAVE a retirement plan through an employer:

  • Single, head of household, or qualifying widow(er): Any MAGI permits a full deduction.
  • Married filing jointly or separately with a spouse who is not covered by a plan at work: Any MAGI permits a full deduction.
  • Married filing jointly with a spouse who is covered by a plan at work: If your MAGI is $178,000 or less, you can take a full deduction. If more than $178,000 (up from $173,000), but less than $188,000 (up from $183,000), you can take a partial deduction. If $188,000 or more, no deduction at all.
  • Married filing separately with a spouse who is covered by a plan at work: If your MAGI is less than $10,000, you can claim a partial deduction. If $10,000 or more, no deduction.

Who said tax law was easy (or fun)?

2014 Traditional IRA Income Limits for Deductions

The 2014 traditional and Roth IRA income limits have both increased.

If you DO HAVE a retirement plan with your employer:

  • Single or head of household: If your MAGI is $60,000 (up from $59,000) or less, you can take a full deduction. If more than $60,000, but less than $70,000 (up from $69,000) – you get a partial deduction. If over $70,000, you cannot take a deduction.
  • Married filing jointly or qualifying widow(er): If your MAGI is $96,000 (up from $95,000) or less, you can take a full deduction. If more than $96,000, but less than $116,000 (up from $115,000) – you get a partial deduction. If over $115,000, no deduction.
  • Married filing separately: If your MAGI is less than $10,000, you can take a partial deduction. If $10,000 or more, no deduction.

If you DO NOT HAVE a retirement plan through an employer:

  • Single, head of household, or qualifying widow(er): Any MAGI permits a full deduction.
  • Married filing jointly or separately with a spouse who is not covered by a plan at work: Any MAGI permits a full deduction.
  • Married filing jointly with a spouse who is covered by a plan at work: If your MAGI is $181,000 or less, you can take a full deduction. If more than $181,000 (up from $178,000), but less than $191,000 (up from $188,000), you can take a partial deduction. If $191,000 or more, no deduction at all.
  • Married filing separately with a spouse who is covered by a plan at work: If your MAGI is less than $10,000, you can claim a partial deduction. If $10,000 or more, no deduction.

Why Are IRA Phaseout Limits Important?

You have an ability to influence whether or not you can deduct your taxes (in a traditional IRA) or contribute to a Roth IRA based on how you impact your MAGI. If you are getting phased out or over the limit, you can look for ways to decrease your MAGI so that you can take advantage of the great benefits that both IRA options offer. Just don’t wait until it’s too late.

On the flip side, you can even get an additional savers tax credit if your MAGI is low enough.

Related Posts:


About the Author
I am G.E. Miller, & this is my story. My goal is financial independence ASAP. If you share that goal, join me & 7,500+ others by getting FREE email updates. You'll also find every post by category & every post in order.


One Comment »
  • Jon says:

    Long time reader first time poster. Hypothetical situation I may run into this year if my bonus turns out larger than expected. #Firstworldproblems

    I made a $5,500 contribution to Roth IRA on 1/1/12. It has performed well and I’m glad that I’ve been able to take advantage of a strong stock market. But I now may run into the phase out limits and wanted to confirm what I’ve been reading.

    If my bonus puts me into the phase out limit, I believe I need to call my brokerage and have the “re-characterize” my contribution. Depending on my MAGI I will transfer that amount and any earnings made to a “non-deductable” IRA (Have retirement account at work).

    Is this correct? Any other tax forms to fill out for the re-characterize? Am I allowed to re-characterize? Do I have to pay a penalty?

    I actually expect to come in right below the $112K cap but want to understand the implications. And I’m definitely going to wait next year until after my bonus to determine whether I can make a Roth contribution because hopefully I’m above the limits!

    Thanks in advance

SPEAK YOUR MIND

Enter your:


Home | Sitemap | Terms | © 20somethingfinance.com