The IRS recently released the 2010 IRA contribution and deduction limits. IRAs (Independent Retirement Accounts) are a great way to save for retirement, even if you already have a 401k at work. Figuring out how much you can contribute and whether your contributions are deductible can be a bit daunting at times. In fact, to figure out these limits, we need to look at several factors:
- Whether you are contributing to a traditional IRA, Roth IRA, or both
- Whether you will be 50 years of age or older before 2011
- Your modified adjusted gross income (MAGI)
- Your taxable compensation
- Whether you or your spouse are covered by a retirement plan at work
And to add to the confusion, many do not realize that anybody can contribute to a traditional IRA regardless of income or retirement plans at work. But it may not be deductible!
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So to help wade through these factors, we’ve put together some handy charts below to help you out. Let’s start with the maximum contribution limits for traditional and Roth IRAs.
Tax Year | Regular Contribution Limit | Catch-up Contribution Limit for those 50 & older |
|---|---|---|
| 2013 | $5,500 | $1,000 |
| 2012 | $5,000 | $1,000 |
| 2011 | $5,000 | $1,000 |
| 2010 | $5,000 | $1,000 |
| 2009 | $5,000 | $1,000 |
| 2008 | $5,000 | $1,000 |
| 2007 | $4,000 | $1,000 |
| 2006 | $4,000 | $1,000 |
There are several things to keep in mind with these limits.
- The contribution limits are combined, meaning you must add together any traditional and Roth IRA contributions, even if they are spread across multiple IRA accounts.
- If your taxable compensation in 2010 falls below these contribution limits, it becomes your contribution limit. In other words, you can’t contribute to an IRA more than you make.
- The maximum contribution to a Roth IRA and the maximum deductible contribution to a traditional IRA may be reduced depending upon your modified adjusted gross income (modified AGI).
And that brings us to the next set of tables. How much of a traditional IRA contribution is deductible depends on several factors: (1) your tax filing status, (2) whether you or your spouse are covered by a retirement plan at work, (3) and your modified adjusted gross income. The first table below applies if you are covered by a retirement plan at work, and the second table applies if you are not covered by a plan.
Deductible Contributions--Covered by Retirement Plan at Work
Filing Status | Modified AGI | Deduction |
|---|---|---|
| Single or Head of Household | $56,000 or less | Full deduction up to the amount of your contribution limit |
| Single or Head of Household | more than $56,000 but less than $66,000 | Partial deduction |
| Single or Head of Household | $66,000 or more | No deduction |
| married filing jointly or qualifying widow(er) | $89,000 or less | Full deduction up to the amount of your contribution limit |
| married filing jointly or qualifying widow(er) | more than $89,000 but less than $109,000 | Partial deduction |
| married filing jointly or qualifying widow(er) | $109,000 or more | No deduction |
| married filing separately | less than $10,000 | A partial deduction |
| married filing separately | more than $10,000 | No deduction |
Deductible Contributions--Not Covered by Retirement Plan at Work
Filing Status | Modified AGI | Deduction |
|---|---|---|
| single, head of household, or qualifying widow(er) | any amount | a full deduction up to the amount of your contribution limit. |
| married filing jointly or separately with a spouse who is not covered by a plan at work | any amount | a full deduction up to the amount of your contribution limit. |
| married filing jointly with a spouse who is covered by a plan at work | $167,000 or less | a full deduction up to the amount of your contribution limit. |
| married filing jointly with a spouse who is covered by a plan at work | more than $167,000 but less than $177,000 | a partial deduction. |
| married filing jointly with a spouse who is covered by a plan at work | $177,000 or more | no deduction. |
| married filing separately with a spouse who is covered by a plan at work | less than $10,000 | a partial deduction. |
| married filing separately with a spouse who is covered by a plan at work | $10,000 or more | no deduction. |
You’ll notice that in some circumstances, you are permitted only a partial deduction. As you income increases within certain ranges of modified AGI, the amount you can deduct decreases. If you have a tax professional prepare your returns, he or she will have the information necessary to calculate exactly how much you can deduct. If you do your own taxes, programs like TurboTax calculate these deductions quite easily.
Roth IRA contributions are made with after-tax income, so there are no deductions or deduction limits to be concerned with. However, there are strict income limitations on who can contribute to a Roth IRA. As noted above, anybody can contribute to a traditional IRA, although your income may make your contribution non-deductible. With a Roth, if you don’t satisfy the income contribution limits, you can’t contribute at all.
So here is table showing the 2010 income limitations on Roth IRA contributions:
Effect of Modified AGI on Roth IRA Contributions
If You Have Taxable Compensation and Your Filing Status Is... | Modified AGI | Contribution Limits |
|---|---|---|
| married filing jointly or qualifying widow(er) | Less than $167,000 | you can contribute up to the limit. |
| married filing jointly or qualifying widow(er) | at least $167,000 but less than $177,000 | the amount you can contribute is reduced. |
| married filing jointly or qualifying widow(er) | $177,000 or more | you cannot contribute to a Roth IRA. |
| married filing separately and you lived with your spouse at any time during the year | zero (-0-) | you can contribute up to the limit. |
| married filing separately and you lived with your spouse at any time during the year | more than zero (-0-) but less than $10,000 | the amount you can contribute is reduced. |
| married filing separately and you lived with your spouse at any time during the year | $10,000 or more | 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 | less than $105,000 | you can contribute up to the limit. |
| single, head of household, or married filing separately and you did not live with your spouse at any time during the year | at least $105,000 but less than $120,000 | the amount you can contribute is reduced. |
| single, head of household, or married filing separately and you did not live with your spouse at any time during the year | $120,000 or more | you cannot contribute to a Roth IRA. |
Remember that it’s not too late to contribute to an IRA for the 2009 tax year. Generally you can contribute anytime on or before April 15, 2010. Several discount online brokers offer IRA accounts, including Scottrade, OptionsXpress and ShareBuilder.
Visit Mint.com to see which IRA is right for you!
Michael Pruser
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Published or updated April 5, 2011.
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