2016 & 2017 Maximum IRA Contribution Limits




The IRS just announced its annual update to the maximum IRA contribution limits, which is the max anyone can contribute to an IRA (or IRA’s) in a given year. Unfortunately, the 2016 maximum IRA contribution limit is the exact same (no increase) as the 2017 maximum IRA contribution limit.

The maximum IRA contribution limit is set annually by the IRS and it is the limit that any individual can legally contribute to their IRA plans. The IRS determines increases by reviewing the consumer price index (CPI) annually. The maximum contribution limit applies to both Traditional IRA’s and Roth IRA’s. You should note that you can have each type of account (and multiple of each type), but the annual maximum contribution is for both types of plans combined and is a cumulative total for all of your IRA accounts.

Here’s a recap of the 2016 and 2017 maximum IRA contribution limits, income limits and phaseouts, and how to get the most out of your IRA accounts.

2016 Maximum IRA Contribution Limits

maximum ira contribution limitsThe standard 2016 maximum IRA contribution limit is $5,500. This is unchanged from the 2015 limit.

2016 IRA Catch-up Contribution

For those age 50 and over, the 2016 IRA catch-up contribution will also stay the same, at an additional $1,000. With the standard contribution at $5,500, this means the 2016 catch-up contribution plus standard contribution is $6,500 in total.

Note that you are eligible for the catch-up contribution if you turn 50 during any day in the calendar year.

2017 Maximum IRA Contribution Limits

The standard 2017 maximum IRA contribution limit is $5,500. This is unchanged from the 2016 limit, as previously noted.

2017 IRA Catch-up Contribution

For those age 50 and over, the 2017 IRA catch-up contribution will also stay the same, at an additional $1,000. With the standard contribution at $5,500, this means the 2017 catch-up contribution plus standard contribution is $6,500 in total.




Historical Maximum IRA Contribution Limits

The last IRA contribution limit increase came in the 2013 calendar year. When the IRS increases the limits, they usually do it in $500 increments. When you’re talking about a $5,500 maximum, a $500 increase is about 10%. So these increases happen relatively infrequently compared to maximum 401K contribution limit increases.

IRA’s have a relatively short history in the American retirement system. Their first year of existence was 1998. Here is how the historical IRA contribution limit has changed since then:

Years:Maximum IRA Contribution (age under 50)Maximum IRA Contribution (age over 50)
1998, 1999, 2000, 2001$2,000$2,000
2002, 2003, 2004$3,000$3,500
2005$4,000$4,500
2006, 2007$4,000$5,000
2008, 2009, 2010, 2011, 2012$5,000$6,000
2013, 2014, 2015, 2016, 2017$5,500$6,500

2016 Traditional 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 that are based on your income. The good news is that those phaseout limits (also tied to CPI) increased in 2016 and 2017, even though there was not a contribution increase.

Keep in mind that with Traditional IRA’s, the limits and phaseouts only dictate how much you can deduct from your taxes, not if you can contribute or not. With Roth’s, the limits and phaseouts dictate how much  you can actually contribute, since Roth contributions are not deductible.

Traditional IRA income limits vary slightly from Roth IRA’s (which I’ll get to in a bit) in that they are tied to whether or not you your employer sponsors a retirement plan for you.

If you DO HAVE a retirement plan with your employer:

  • Single or head of household: If your MAGI is $61,000 (same as prior year) or less, you can take a full deduction. If more than $61,000, but less than $71,000 (same as prior year) – you get a partial deduction. If over $71,000, you cannot take a deduction.
  • Married filing jointly or qualifying widow(er): If your MAGI is $98,000 (same as prior year) or less, you can take a full deduction. If more than $98,000, but less than $118,000 (same as prior year) – you get a partial deduction. If over $118,000, 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 $184,000 or less (up from $183,000), you can take a full deduction. If more than $184,000, but less than $194,000 (up from $193,000), you can take a partial deduction. If $194,000 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.

2016 Roth IRA Income Limits

The 2016 Roth IRA income phaseout limits are as follows:

  • Married filing jointly or qualifying widow(er): If your modified gross adjusted income (MAGI) is $184,000 (up from $183,000) or less, you can contribute up to the $5,500 max. If at least $184,000 up to $194,000 (up $2,000), your contribution limit is phased out (see IRS publication 590). If $194,000 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 $117,000 (up from $116,000), you can contribute up to the $5,500 maximum. If at least $117,000 up to $132,000 (was $131,000), your contribution limit is phased out. If $132,000 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.

2017 Traditional 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 that are based on your income. The good news is that those phaseout limits (also tied to CPI) increased in 2016 and 2017, even though there was not a contribution increase.

Keep in mind that with Traditional IRA’s, the limits and phaseouts only dictate how much you can deduct from your taxes, not if you can contribute or not. With Roth’s, the limits and phaseouts dictate how much  you can actually contribute, since Roth contributions are not deductible.

Traditional IRA income limits vary slightly from Roth IRA’s (which I’ll get to in a bit) in that they are tied to whether or not you your employer sponsors a retirement plan for you.

If you DO HAVE a retirement plan with your employer:

  • Single or head of household: If your MAGI is $62,000 (up from $61,000) or less, you can take a full deduction. If more than $62,000, but less than $72,000 (up from 71,000) – you get a partial deduction. If over $72,000, you cannot take a deduction.
  • Married filing jointly or qualifying widow(er): If your MAGI is $99,000 (up from $98,000) or less, you can take a full deduction. If more than $99,000, but less than $119,000 (up from $118,000) – you get a partial deduction. If over $119,000, no deduction.
  • Married filing separately: If your MAGI is less than $10,000 (same as prior year), 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 $186,000 or less (up from $184,000), you can take a full deduction. If more than $186,000, but less than $196,000 (up from $194,000), you can take a partial deduction. If $196,000 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.

2017 Roth IRA Income Limits

The 2017 Roth IRA income phaseout limits are as follows:

  • Married filing jointly or qualifying widow(er): If your modified gross adjusted income (MAGI) is $186,000 (up from $184,000) or less, you can contribute up to the $5,500 max. If at least $186,000 up to $196,000 (up $2,000), your contribution limit is phased out (see IRS publication 590). If $196,000 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 $118,000 (up from $117,000), you can contribute up to the $5,500 maximum. If at least $118,000 up to $133,000 (was $132,000), your contribution limit is phased out. If $133,000 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.

IRA Tips

  1. Spousal IRA Contributions: Take Advantage of Spousal IRA Contributions! If you are married, you should become familiar with how spousal IRA contributions work, as a spousal IRA could dramatically boost your family’s IRA contributions in a given year if either you or your spouse don’t earn qualifying income.
  2. Self-Employment Income: You may be able to deduct business related expenses and your home office and can contribute a portion of your income to self-employment retirement accounts, such as a solo 401K, SIMPLE IRA, or SEP IRA.
  3. Tax Credit for Contributing: If your income is low enough, you might also qualify for the Saver’s Credit for contributing to one of these types of retirement accounts.
  4. IRA Consolidation: If you have old 401K’s sitting around from jobs long forgotten, you should consider consolidating your 401K’s and rolling over to an IRA. IRA’s typically have lower fees associated with them.
  5. MyRA: I strongly recommend checking out the government’s myRA plan, which is basically a Roth IRA with principal protection and no fees. It allows you to invest in government savings bonds with the goal of beating inflation.
  6. Contribution Deadline: Note that you can still contribute to your IRA’s for the 2016 calendar year up until the tax deadline next April. And you can begin contributing for 2017 on Jan. 1, 2017.

Maximum IRA Contribution Discussion:

Will you contribute to an IRA for the 2016 and 2017 calendar years? How much?

One Response

  1. Peter

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