IRA Contribution Limits

It used to be simple and clear. Anyone who was eligible for an IRA could make a $2,000 tax deductible contribution per year. End of story. Times have changed and so have the rules to the extent that most people turn to the internet and IRS publications each year to re-educate themselves on IRA contributions limits. And, as expected, the rules, once again, changed for 2011 IRA contributions. So, herewith are your definitive guidelines for IRA contributions for the various types of IRA plans:

Traditional IRA Contributions

The contribution limit for traditional IRAs is $5,000 for eligible income earners who do not have access to an employer sponsored retirement plan. If you do have access to an employer plan, the tax-deductible contribution phase-out guidelines have been adjusted as follows:

If you file taxes jointly, you may make a fully deductible contribution if your adjusted gross income (AGI) is below $90,000. The tax deductibility of your contribution will be phased out if your income is between $90,000 and $110,000. For incomes beyond $110,000 the tax deduction is disallowed.

If you file jointly, and your spouse has access to an employer plan, then the AGI range for phase-out is $169,000 to $179,000
The phase-out AGI range for single or head-of-household filers is between $56,000 and $66,000, and for married-filing separately, the phase-out begins below $10,000.

Roth IRA Contributions

The eligibility rules for Roth IRAs are different than those of traditional IRAs. Although, the contributions to Roth IRAs are not tax deductible, there are specific income requirements that must be met in order to make a contribution. They are as follows:

Income earners who file single returns can make a Roth IRA contribution if their AGI is no more than $107,000. Contributions are not allowed for single filers who make more than $122,000, and the contribution limit is phased out for AGIs that fall in between.

For joint filers, the income range is $169,000 and $179,000, below which a full contribution can be made, and above which contributions are not allowed.

IRA Catch-Up Contribution

The catch-up contribution remains at $1,000, which raises the maximum contribution level to $6,000 to both traditional and Roth IRAs for anyone who is at least 50 years of age.

SIMPLE IRA Contributions

If you participate in an employer sponsored SIMPLE IRA salary deduction plan, the contribution limit is unchanged at $11,500 except for employees who are at least 50 years of age who are able to add a catch-up contribution of $2,500 for a total contribution of $14,000. While these are the maximum allowable contribution limits, employers may establish their own rules and guidelines that can affect these limits.

Generally, IRA contribution limits are subject to change each year based on year-over-year changes in the cost-of-living indexes. With the cost of living remaining relatively flat over the last few years, we haven’t seen any increases in the contributions limits. However, we have seen upward adjustments made in the AGI limits for contribution eligibility.