401k and IRA Contribution and Deduction Limits for 2016

The IRS recently released the new 2016 401k and IRA contribution and deduction limits. The limits for both IRAs and 401ks remain the same in 2016. And that’s true for both contributions and catch-up contributions for those 50 or older. Here are the details.

401(k) Contribution Limits

As announced by the IRS, the contribution limit for 401(k) accounts remains at $18,000 in 2016.  Those 50 or older also get the catch-up contribution of $6,000.  That brings the total contribution limit to $24,000 for those who qualify.

Tax YearRegular Contribution LimitCatch-up Contribution Limit for those 50 & older
2016$18,000$6,000
2015$18,000$6,000
2014 $17,500$5,500
2013$17,500$5,500
2012$17,000$5,500
2011$16,500$5,500
2010$16,500$5,500
2009$16,500$5,500
2008$15,500$5,000
2007$15,500$5,000
2006$15,000$5,000

IRA Contribution and Deduction Limits

With a deductible IRA, it’s important to understand both the contribution limits and the income limits to qualify for the deduction. While you can always contribute up to the $5,500 contribution limit (as of 2016) assuming you have sufficient earned income, you’ll only be able to deduct your contribution on your federal taxes if you fall into contribution limits.

It’s important to understand both contribution and deduction limits when you’re deciding how much to contribute to an IRA in any given year.

IRA Contribution Limits

The maximum contribution in 2016 is still $5,500. The catch-up contribution for those 50 and older remains $1,000 (the catch-up contribution for an IRA is not indexed for inflation, so it always remains at $1,000).  Here are the IRA contribution limits over the last several years:

Tax YearRegular Contribution LimitCatch-up Contribution Limit for those 50 & older
2016$5,500$1,000
2015$5,500$1,000
2014$5,500$1,000
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

Deductible IRA Income Limits

Now on to the question of whether your IRA contribution is deductible. Whether your IRA contribution is deductible depends on three factors: (1) your filing status, (2) your adjusted gross income, and (3) whether you are covered by a retirement plan at work.

Below are listed the phase out ranges based on the above factors for both 2015 and 2016. If your AGI is less than the bottom of the applicable range, your IRA contribution is fully deductible. If your AGI falls within the range, your contribution is partially deductible. And if your AGI is above the range, then your contribution is not deductible.

2015

If you are covered by a workplace retirement plan, your phase out range is as follows:

  • Singles and heads of household: $61,000 to $71,000
  • Married couples filing separately: $98,000 to $118,000 (if the person making the IRA contribution is covered by a workplace retirement plan)
  • Married couples filing separately: $0 to $10,000

If you are not covered by a workplace retirement plan, your phase out range is as follows:

  • Married couples filing separately: $183,00 to $193,000 (if your spouse is covered by a workplace retirement plan)

2016

If you are covered by a workplace retirement plan, your phase out range is as follows:

  • Singles and heads of household: $61,000 to $71,000
  • Married couples filing separately: $98,000 to $118,000 (if the person making the IRA contribution is covered by a workplace retirement plan)
  • Married couples filing separately: $0 to $10,000

If you are not covered by a workplace retirement plan, your phase out range is as follows:

  • Married couples filing separately: $184,00 to $194,000 (if your spouse is covered by a workplace retirement plan)

Other Limits

If you are a single or head of household filer and are not covered by a retirement plan at work, you can take the full deduction up to the year’s contribution limit, regardless of your income.

If you’re married filing jointly or separately, and neither spouse is covered by a work-based retirement plan, you can take the full deduction up to your contribution limit, regardless of income.

(Note: If you’re interested in a Roth IRA, those income limits have changed as well. You can get the scoop on 2015 and 2016 Roth IRA limits here.)

SEP IRAs and Solo 401(k)s

Self-employed individuals and small business owners have much higher contribution limits: $53,000 per year in 2015 and 2016. This is the amount that a self-employed individual or small business owner can contribute to certain retirement accounts, subject to percentage of income limitations.

The table below shows historical changes in SEP IRA and Solo 401(k) contribution limits. The 2016 compensation limit for these accounts is $265,000, unchanged from 2015.

The table below shows these historical changes:

Tax YearCompensation LimitContribution Limit
2016$265,000$53,000
2015$265,000$53,000
2014 $260,000$52,000
2013$255,000$51,000
2012$250,000$50,000
2011$245,000$49,000

To learn more about SEP IRAs and Solo 401ks, check out this article.


Published or Updated: April 29, 2016
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Comments

  1. Long says:

    Just a note that if you are disqualified from contributing to a Roth IRA because of income limits, you can always open a non-deductible Traditional IRA and convert it immediately to a Roth.

    I’ve been doing it for the past 3 years because of income limitations and plan to do it again in 2013. Keeping my fingers crossed that lawmakers don’t close the loophole, or get some sense in their heads and just lift the income limits.

  2. Long says:

    Just a note that if you are disqualified from contributing to a Roth IRA because of income limits, you can always open a non-deductible Traditional IRA and convert it immediately to a Roth.

    I’ve been doing it for the past 3 years because of income limitations and plan to do it again in 2013. Keeping my fingers crossed that lawmakers don’t close the loophole, or get some sense in their heads and just lift the income limits.

    • Scott Venerable says:

      Long,

      I have a client who has 2 million in taxable income each year and looking for creative ways to reduce that taxable income. How does opening a Traditional IRA and then Converting immediately to a Roth help with this problem?

  3. Bianca says:

    I am aware there are limits for both 401(k) and IRA plans. I am a federeal government employee and have the Thrift Savings Plan. I am thinking about opening an IRA to contribute more money towards retirement. IRA’s are more flexible in what you want to contribute to as compared to 401(k)’s and my dreaded TSP. The only reason I am even keeping my TSP is because my employer matches up to 5%. I figure free money is free money.

    My question is what is the limit on contributions if you have both accounts? I read somewhere that you have to consider both or you will be penalized for over contributing.

  4. Bianca says:

    I am an employee of the federal government and have a Thrift Savings Plan. I have been thinking about additionally opening an IRA because of the flexibility of what you can invest in. 401(k)’s are limited and the TSP is even worse. The only reason I am sticking with it is because my employer matches up to 5%.

    I would like to know what the contribution limitations are when you have one of each. My guess is that you cannot do the full contribution for both.

    • Long says:

      Bianca,

      The limit for the TSP is the same as a 401k ($17,000 this year, $17,500 for 2013) and the limit for an IRA is $5,000 this year, and $5,500 in 2013. The amounts are independent of each other.

      If I were you, I would contribute more to the TSP. The funds are managed by Blackrock – they have great returns and low fees. Low fees are surprising for funds run by Blackrock, but they must have some kind of deal in place for the government. Makes me wish I were still in the Army.

  5. Jim says:

    If you refer to your 401k Contribution table, you indicate in years 2009 through 2011 that the Catch-Up Contribution limit was $5,500. Is this correct?

    • Rob Berger says:

      Yes, I believe it is.

      • Jim says:

        So then, it dropped back down to $5,000 in 2012? (referencing the 401k table in this article)

        • Rob Berger says:

          Jim, you are absolutely correct. Good catch. I’ve updated the table.

  6. Kenneth says:

    Rob, in the IRA contributions section, for both 2014 and 2015, you mention “Married Couples Filing Jointly” twice, the first instance of each should be “filing separately” I believe.

    • Rob Berger says:

      Kenneth, actually those both should be filing separately. One is when the spouse making the contribution is covered by a workplace plan. The other is when the spouse making the contribution is NOT covered by a plan, but his or her spouse is.

  7. bob says:

    I understand what the 401K and IRA Contribution limits are. I also understand that the Deductibility for IRA contributions may be limited depending upon one’s income level. What I don’t understand is this: Can I contribute the max of $23,000 for 2014 to my 401K REGARDLESS of my income level, or is it too effected by my income – and if so, what are the levels. I am afraid that I may have contributed too much to my 401K this year. Please respond. Thanks.

    • Rob Berger says:

      Bob, since 401(k) contributions come directly out of your paycheck, it’s difficult to over-contribute. It can happen if you have multiple jobs or change jobs during the year. But if your employer took out the max, I assume your income was sufficient to cover the contributions. You could always check with your 401k administrator to make sure.

  8. Aaron says:

    What is the IRA deductible limit in 2014 if I switch from a job with retirement plan (only 2 weeks) to a job (for the rest of the year) which does not offer any retirement plan?

  9. Dibs says:

    I contribute to a 401K plan with my employer and I also have a traditional IRA. I was going to do a catch-up contribution for the IRA but my income is over the limit to be deductible. What are the advantages for doing the catch-up contribution anyway? Thank you.

    • Rob Berger says:

      Dibs, the advantage is that any earnings will grow tax deferred until you withdrawal the money. That may or may not be a big enough advantage depending on your circumstances. Do you qualify for a Roth?

  10. S. Allen says:

    I understand the income limits for married filing jointly (both also covered under employer’s plan), but are these limits based on the individual’s income (the one contributing to the IRA) or on the AGI of the married couple? I want to open a traditional IRA and my income is below the limits; however, my household income (my income + spouse) is not. Which income am I looking at when reading the chart?

    S.Allen

  11. BJ says:

    I am a federal employee and with my husband and myself I discovered we were above the Roth income limits and therefore I tried to close the Roth portion only of my TSP – only to have them close both my traditional TSP (they sent a check) and then sent the Roth portion to Edward Jones – stating you can only withdraw proportionally. Now I feel like my entire retirement savings is hosed! TSP reported it as a withdrawal to the IRS so I cannot now classify it as a rollover and recover some even though they sent a substantive portion of my savings to the IRS as well. We’re talking a lifetime of savings and TSP tells me they don’t care they didn’t make a mistake. Now I guess I don’t ever retire.

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