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IRA Contribution Limits for 2024
Contributing to an individual retirement account (IRA) is an excellent way to grow your savings and enjoy tax benefits. However, like 401(k) and other retirement accounts, IRAs have contribution limits. Your income and your spouse’s earnings can also affect these limits. Understanding these rules can help you maximize your IRA benefits and stay compliant with IRS regulations.
IRA Contribution Limits for 2024
If you have an IRA, you can contribute up to the annual limit or your earned income, whichever is lower. There are two main types of IRAs:
Traditional IRAs
Contributions to a Traditional IRA may be tax-deductible, reducing your taxable income. Your money grows tax-deferred, meaning you won’t pay taxes until you withdraw it in retirement. Early withdrawals before age 59½ may incur a 10% penalty and be taxed as income. Required minimum distributions (RMDs) start at age 73.
Roth IRAs
Roth IRAs are funded with post-tax money, allowing you to withdraw contributions tax- and penalty-free at any time. Investment earnings can also be withdrawn tax-free if you’re at least 59½ and have had the account for five years. RMDs do not apply to Roth IRAs unless it’s an inherited account.
2024 IRA Contribution Limits
The contribution limits for 2024 are as follows:
- Under 50: $7,000
- 50 and older: $8,000
Source: IRS
IRA Income Limits for 2024
While there are no income limits for Traditional IRAs, Roth IRAs have specific income thresholds. As your income increases, your contribution limit may decrease. Below are the Roth IRA income limits for 2024:
2024 Roth IRA Income Limits
| Tax Filing Status | Can I Contribute the Maximum Amount? | When Are Contributions Reduced? | When Can I No Longer Contribute to a Roth IRA? |
|---|---|---|---|
| Single, head of household, or married filing separately (didn’t live with spouse during 2024) | Yes, if income is less than $146,000 | $146,000 to $160,999 | $161,000+ |
| Married filing jointly or qualified widow(er) | Yes, if income is less than $230,000 | $230,000 to $239,999 | $240,000+ |
| Married filing separately | No | $1 to $9,999 | $10,000+ |
Source: IRS
Traditional IRA Deduction Limits for 2024
Traditional IRA contributions are tax-deductible if neither you nor your spouse is covered by a workplace retirement plan. If either of you is covered, the deduction phases out based on your tax filing status and modified adjusted gross income.
2024 Traditional IRA Deduction Limits
| Tax Filing Status | Can I Take the Full Tax Deduction? | When Is the Deduction Reduced? | When Can I No Longer Take the Deduction? |
|---|---|---|---|
| Single or head of household and covered by a workplace retirement plan | Yes, if income is $77,000 or less | $77,001 to $86,999 | $87,000+ |
| Married filing jointly and covered by a workplace retirement plan | Yes, if income is $123,000 or less | $123,001 to $142,999 | $143,000+ |
| Married filing jointly and spouse is covered by a workplace retirement plan | Yes, if income is $230,000 or less | $230,001 to $239,999 | $240,000+ |
| Married filing separately and covered by a workplace retirement plan | No | Less than $10,000 | $10,000+ |
Source: IRS
What Happens if You Contribute Too Much to an IRA?
Overfunding your IRA can result in a 6% penalty for each year the excess remains in your account. To avoid this, correct the mistake before the April tax filing deadline by either:
- Removing the excess contributions and earnings (note that removing money from a Traditional IRA may result in taxes and a 10% early withdrawal penalty)
- Reassigning the excess contributions to the following year
If the tax deadline has passed, you can file an amended tax return before October 15. Be sure to report any earnings. Waiting until after the October deadline will result in penalties.
The Bottom Line
Understanding IRA contribution rules can help you maximize your retirement savings and enjoy tax benefits. These guidelines ensure you contribute the right amount without facing penalties. Combining 401(k)s and IRAs can help you build a robust retirement fund. If you’re self-employed, consider additional retirement plans tailored to your needs.
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