Updated for 2017: One of the best ways to save for retirement is with an Individual Retirement Arrangement, or IRA. Because of the great tax advantages, the IRS created maximum IRA contribution limits on IRAs. These caps are set by Congress, and can change from time to time.
The IRS recently announced the 2017 Traditional and Roth IRA contribution limits. There is no change to the contribution limits from 2015. There were, however, some changes to the income limits for deductions for Traditional IRAs, and changes to the Roth IRA income eligibility limits. This article covers all you should need to know about 2017 IRA Contribution and Deduction Limits. Need to learn more about Roth Withdrawal Rules, we can help with that too!
Traditional and Roth IRA Contribution Limits
The Traditional and Roth IRA contribution limits are $5,500 for those under age 50. Persons age 50 and over can make additional catch up contributions of $1,000, for a total contribution limit of $6,500.
You can have both a Roth IRA and a Traditional IRA in the same tax year, but you can’t exceed the contribution limit with your combined contributions to both accounts. Self-employed retirement plans may have different rules, so be sure to read up on the different self-employment tax plans or check with your accountant or financial advisor.
Current & Historic IRA Contribution Limits
|Tax Year||Contribution Limit Age 49 & Below||Catch-up Contribution Limit Age 50 & Above||Contribution Limit Age 50 & Above|
|2006 - 2007||$4,000||$1,000||$5,000|
|2002 - 2004||$3,000||$500||$3,500|
Traditional IRA Deductions and Roth IRA Eligibility Phase outs
The IRS has specific rules regarding who can contribute to an IRA. Traditional IRAs and Roth IRAs base certain eligibility guidelines on the taxpayer’s Modified Adjusted Gross Income (MAGI), which is calculated when you file your taxes.
2017 Traditional IRA Deduction Income Limits
The IRS imposes income limits for those who are able to make a tax-deductible contribution to their Traditional IRA account. Those who earn less than a certain amount (detailed below) are able to deduct 100% of the contribution. There is a phase-out that allows participants to deduct a lesser amount than the full contribution level. Participants who have an Modified Adjusted Gross income greater than the highest level are not able to take a deduction on their contributions.
- Single or Head of Household can deduct the full amount of their contribution their MAGI is $62,000 or less. Deduction rates phase out beginning at a MAGI above $62,001, and end at $72,000 (up from $61,000, and $71,000, respectively in 2016). There is no tax deduction for those who have an income higher than $72,000.
- Married Filing Jointly can make maximum Traditional IRA contributions for an income of $99,000 or less. Traditional IRA eligibility ends at $119,000. (up from $98,000 and $118,000, respectively in 2016). There is no deduction for taxpayers who have an AGI of greater than $119,000.
- Married Filing Separately deductible contributions begin to phase-out with MAGI of $0, and are completely phased-out one MAGI exceeds $10,000.
2017 Roth IRA Eligibility Income Limits
Like the Traditional IRA, the IRS has phase out rules for Roth IRA contributions. Tax filers will be able to contribute the maximum amount to their IRA if they don’t exceed certain income limits.
- Single or Head of Household can contribute the maximum if their MAGI is $118,000 or less. Contribution rates phase out beginning at a MAGI above $118,001, and end at $133,000 (up from $117,000, and $132,000, respectively in 2016).
- Married Filing Jointly can make maximum Roth IRA contributions for an income of $186,000 or less. Roth IRA eligibility ends at $196,000. (up from $184,000 and $194,000, respectively in 2016).
- Married Filing Separately contributions begin to phase-out with MAGI of $0, and are completely phased-out one MAGI exceeds $10,000.
These income limits apply to everyone, regardless of age, however, those age 50 and above can contribute an additional $1,000 per year as catch-up contributions. You only need to be age 50 or older for one day during the calendar year to be eligible for the catch-up contributions.
For specific questions, please see IRS Pub 590.
Opening an IRA, and IRA Contribution Deadlines
You can make IRA contributions for the previous tax year up to the tax filing deadline of the current year. For example, you can make a contribution for the 2016 tax year until April 17, 2017 (tax day is normally April 15th, unless that falls on a weekend or holiday).
If you make an IRA contribution between January 2 and the tax deadline, you should designate which tax year your contributions are for, as you can also contribute to current year IRAs during the same time frame. Here are some recommendations for opening a Roth IRA.