I’ve written a fair bit on tax-advantaged individual retirement plans, but still keep getting lots of questions on this topic. This is likely due to two main factors. One, thanks to the complexities of our tax code, it is not always easy to find current and applicable IRA information.
Secondly, because you can have multiple tax-advantaged accounts (e.g a 401K and Roth IRA account) at the same time it is not clear what and how much you can contribute. Hopefully this article can make things clearer when it comes to Individual Retirement Accounts (IRA). I am using information directly from the IRS, so you have the official word.
There are 3 things you need to consider when determining if you can make IRA contributions.
The first is whether you (or your spouse if applicable) already contribute to an employer sponsored retirement account, like a 401K or 403b plan.
Secondly you need to see what you can contribute based on your Modified Adjusted Gross Income( MAGI).
Finally you need to determine how much you can contribute based on your filing status and age.
Below are the latest limits for Traditional IRA plans based on this criteria.
| Year | ||
|---|---|---|
| 2023 | (Single and have Employer Plan) - $73,000 to $83,000 (Married and have Employer Plan) - $116,000,000 to $136,000 (Married Filing Separately and have Employer Plan) - $0 to $10,000 (Married and Spouse has Employer Plan) - $218,000 to $228,000 |
|
| 2022 | (Single and have Employer Plan) - $68,000 to $78,000 (Married and have Employer Plan) - $109,000 to $129,000 (Married Filing Separately and have Employer Plan) - $0 to $10,000 (Married and Spouse has Employer Plan) - $204,000 to $214,000 |
|
| 2021 | (Single and have Employer Plan) - $66,000 to $76,000 (Married and have Employer Plan) - $105,000 to $125,000 (Married Filing Separately and have Employer Plan) - $0 to $10,000 (Married and Spouse has Employer Plan) - $198,000 to $208,000 |
|
| 2020 | (Single and have Employer Plan) - $65,000 to $75,000 (Married and have Employer Plan) - $104,000 to $124,000 (Married Filing Separately and have Employer Plan) - $0 to $10,000 (Married and Spouse has Employer Plan) - $196,000 to $206,000 |
Note that the above are the maximum contributions you can deduct for all of your traditional AND Roth IRAs in the current tax year. The IRA contribution limits does not apply to rollover contributions.
For workers already covered by an employer sponsored retirement plan (401k, 403b), contributions to a self-managed IRA plan are only tax deductible if their adjusted gross income (AGI) is within the limits shown in the table above.
If you are below the income threshold range then the entire contribution (up to maximum limit) is tax deductible. However, if your income is in between the threshold range then only a partial amount of the contribution is deductible. For income levels above the threshold range then none of the contribution is deductible.
If you are married and not covered by an employer sponsored plan BUT your spouse has an employer sponsored plan then you can still contribute to an IRA plan. The IRS has provided higher income limit thresholds for claiming a tax deduction on contributions to accomodate this situation. You can see this in the “(Married and Spouse has Employer Plan) ” income threshold line within the table above.
There are no contribution income limits and your IRA tax deduction is allowed in full if you (and your spouse, if you are married) aren’t covered by a retirement plan at work.