Individual retirement accounts (IRAs) are a tool that allows you to save and invest for your retirement. There are annual limits to how much money you can deduct and contribute from taxes. These limits can be affected by your income.
The contribution limits for IRAs (both standard and Roth) will increase by $500 in 2023 and by another $500 by 2024. In 2024, you will be able to contribute up to $7,500 to an IRA if your age is under 50, or up to $8,500 if it’s 50 years of age and older.
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What is an Individual Retirement Account (IRA)?
Individual Retirement Accounts (IRAs) are a way to save for retirement that offers tax advantages. People who do not have access to employer-sponsored retirement plans such as the 401(k) can benefit from IRAs. You can open an IRA even if you already have a 401k at work. The only limit is the amount you can put in each year.
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The IRA Contribution Limit for 2024
Here is a quick overview of the IRA contribution limit for 2024.
- Under 50s: $7,000
- If you are 50 or older, the cost is $8,000
- This is an increase of $500 from the limits in 2023.
Roth IRA Contribution News
Roth IRA contributions are made after taxes, so you will not get a deduction in the year of the contribution. The withdrawals that you make in retirement are not taxed. Roth IRAs do not have required minimum distributions, so you’re not forced to take money out if you’re not in need of it.
The Roth IRA contribution limits are the same for 2023 and 2024 as they are for traditional IRAs. The income phase-out levels are slightly different.
- The phase-out range for single filers is $138,000 – $153,000 in 2023, and $146,000 -161,000 in 2024.
- The phase-out range for married couples filing jointly is between $218,000 and $228,000 in 2023, and between $230,000 and $240,000 in 2024.
Simple IRA Contribution News
SIMPLE IRAs are geared towards small businesses and individuals who work for themselves. SIMPLE IRA contributions can be made by both employers and employees and are all tax deductible. It can lower tax rates for both employees and businesses.
In 2023, employees can contribute up to $15,500. There is a $3,500 catch-up for those over 50. In 2024 the contribution limit will rise to $16,000 while the catch-up limits remain at $3,500.
News about Traditional IRA Contributions
Contributions to traditional IRAs can usually be deducted from your taxes. If you contribute $4,000 into a traditional IRA your taxable income will be reduced by that amount. Unlike Roth IRAs, there is no limit on the income you can contribute to a traditional IRA. However, your ability to deduct that amount may be limited based on your income or filing status.
In 2023, the maximum contribution amount to a traditional IRA will be $6,500. This includes a $1,000 catch-up contribution, which is available for people 50 years and older. The total contribution amount will then be $7,500. In 2024 the contribution cap will increase to $7,000 and the catch-up amounts remain at $1,000.
| Filing Status | Income limit for traditional IRAs in 2024 | Deduction limit |
|---|---|---|
| Single or head household (and covered under retirement plan at work). | $77,000 or less. | Deductions are made in full. |
| More than $77,000 but less than $87,000 | Partial deduction. | |
| Eighty-seven thousand dollars or more | No deduction. | |
| Married filing jointly | $123,000 or less. | Deductions are made in full. |
| More than $123,000 but less than $143,000 | Partial deduction. | |
| 143,000 dollars or more | No deduction. | |
| Married filing jointly | $230,000 or less. | Deductions are made in full. |
| More than $230,000 but less than $250,000. | Partial deduction. | |
| More than $240,000 | No deduction. | |
| Separate filing for married couples (if you or your spouse are covered by a retirement plan at work). | Less than $10,000 | Partial deduction. |
| $10k or more | No deduction. |
IRS increased the IRA contribution limit to keep up with inflation-driven living costs. If you can, it’s a great idea to contribute as much money as possible to your IRAs and employer-sponsored retirement plan. Consider a health savings account (HSA), as it offers tax advantages and can be invested.
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FAQs
What is the new IRA Contribution Limit for 2024?
For those aged 50 and older, the new contribution limit is $8,000 and for those younger than 50 it’s $7,000.
Are Roth IRA contributions tax deductible?
Roth IRA contributions, however, are not tax deductible. They are made after tax and therefore are not deductible.
Can I contribute both to a 401(k), and an IRA at the same time?
You can contribute both to a 401(k) and to an IRA. However, there are limitations on the amount you can put into each.
