Retirement

IRA Contribution Limits 2021

The Internal Revenue Service sets the IRA contribution limits every year. It also determines how much one can claim a deduction for their IRA contributions. The IRA contribution limit for 2020 was $6,500 which was upped from $5,500 from 2018. Also, those who are 50 and older get an extra $1,000 to contribute. This makes it $7,000 for aged 50 and older.

Most recently, the IRA contribution limits were increased from $5,500 to $6,000. Before that, the last increase came in 2013. While the 401(k) contribution limits are updated regularly, the IRA contribution limits, not so much. From 2002 to the present day, here are the IRA contribution limits.

YearIRA Contribution LimitIRA Contribution Limit (50 and older)
2002$3,000$3,500
2003$3,000$3,500
2004$3,000$3,500
2005$4,000$4,500
2006$4,000$5,000
2007$4,000$5,000
2008$5,000$6,000
2009$5,000$6,000
2010$5,000$6,000
2011$5,000$6,000
2012$5,000$6,000
2013$5,500$6,500
2014$5,500$6,500
2015$5,500$6,500
2016$5,500$6,500
2017$5,500$6,500
2018$5,500$6,500
2019$6,000$7,000
2020$6,000$7,000
2021TBATBA

The Internal Revenue Service is expected to announce the IRA contribution limits for 2021. Although it is expected that the contribution limits will stay the same as in 2020, the agency may increase the limits. Same as the 401(k) contributions, the taxpayers can deduct their contributions. However, IRA contributions are more subject to income restrictions.

IRA Deduction Income Limits

Regardless of how much you contribute to an IRA, you can get a full deduction. Whether or not you can claim the full deduction comes down to your filing status, income, and if you or your spouse is covered by a retirement plan at work.

At the time of writing, if you’re covered by retirement plan at work, the thresholds are as follows.

Filing StatusModified AGI*Deduction
SingleLess than $65,000
$65,000 to $75,000
More than $75,000
Full Deduction
Partial Deduction
No Deduction
Head of HouseholdLess than $65,000
$65,000 to $75,000
More than $75,000
Full Deduction
Partial Deduction
No Deduction
Married Filing JointlyLess than $104,000
$104,000 to $124,000
More than $124,000
Full Deduction
Partial Deduction
No Deduction
Married Filing SeparatelyLess than $10,000
More than $10,000
Partial Deduction
No Deduction

*Modified Adjusted Gross Income refers to adjusted gross income but certain deductions and adjustments added back.

As you can see from the table above, the IRA deduction literally forces married couples to file taxes jointly. If you and your spouse earn a similar income but file taxes separately for other reasons, you may want to reconsider. Because the income threshold for married filing separately is so low, you may get more in return if you were to file taxes jointly.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Check Also
Close
Back to top button