Table of Contents
- Understanding the Traditional IRA and Roth IRA
- 2023 Traditional and Roth IRA Contribution Limits
- Traditional IRA Roth IRA Income Limits
- Traditional IRA Income Limits and Deduction Phase-Outs
- 2023 IRA Phase-Out Limits Chart
- Roth IRA Income Limits
- 2023 Roth IRA Income Limits Chart
- Did You Contribute Too Much to Your IRA?
- IRA Contribution Deadlines
- More Information About IRAs
Individual Retirement Arrangements (IRA) come in two flavors, Roth IRAs and traditional IRAs. While they are similar in some respects, there are two major differences that have a very powerful impact: how IRA contributions are taxed and income eligibility limits.
In 2023, you can contribute up to $6,500 to a traditional IRA or Roth IRA, a $500 increase from 2022. If you’re at least 50 years old you can save an additional $1,000 in catch-up contributions, for a total of $7,500.
Here’s what you need to know about traditional and Roth IRAs, contribution limits and income eligibility, according to the IRS.
Understanding the Traditional IRA and Roth IRA
There are two main types of IRA accounts available to most people: traditional and Roth IRA.
The short and quick explanation is that you make traditional IRA contributions with pre-tax money. The investments grow, then you pay taxes on the money and its growth when you withdraw it.
You can make Roth IRA contributions with money that you have already paid taxes on. It grows without the drag of taxes, so you can withdraw it without any additional taxation.
Both traditional and Roth IRAs are subject to certain income limits and other rules for deductions and eligibility.
2023 Traditional and Roth IRA Contribution Limits
If you are younger than 50 years old, $6,500 is the maximum amount you can invest in a traditional or Roth IRA. If you are 50 or older, you are eligible for a catch-up contribution of $1,000 and can contribute up to $7,500.
The IRA contribution limit applies to all your individual IRA accounts (self-employed retirement plans may have different rules). For example, you could contribute $3,000 to a traditional IRA and $3,000 to Roth IRA – or any combination, so long as the total does not exceed $6,500.
The following chart shows historical IRA contribution limits.
| Tax Year | Contribution Limit Age 49 or Younger | Catch-Up Contribution Limit Age 50 or Older | Contribution Limit Age 50 or Older |
|---|---|---|---|
| 2023 | $6,500 | $1,000 | $7,500 |
| 2019 - 2022 | $6,000 | $1,000 | $7,000 |
| 2013 - 2018 | $5,500 | $1,000 | $6,500 |
| 2008 - 2012 | $5,000 | $1,000 | $6,000 |
| 2006 - 2007 | $4,000 | $1,000 | $5,000 |
| 2005 | $4,000 | $500 | $4,500 |
| 2002 - 2004 | $3,000 | $500 | $3,500 |
Traditional IRA Roth IRA Income Limits
Your modified adjusted gross income (MAGI) determines your eligibility to make a tax-deductible contributions to a traditional or Roth IRA. You can see your MAGI on your tax form.
Here are the 2023 IRA income limits, according to the IRS.
Traditional IRA Income Limits and Deduction Phase-Outs
The traditional IRA phase-out schedule determines whether or not you can deduct your contributions against your taxes. The phase-out for traditional IRA deductions for single filers begins at $73,000 and ends at $83,000 in 2023. The range for married filing jointly is between $116,000 and $136,000.
If your income is below these levels, you can deduct the full amount of your IRA contributions when you file your taxes. You can not deduct your IRA contributions when you file your taxes if you earn more than the phase-out threshold for your filing status.
If you earn more than the phase-out limit for your tax filing status, you can still contribute to a traditional IRA. You just can’t deduct your contributions from your taxes.
However, contributing to a nondeductible traditional IRA may still be a good investment for high-earners who don’t meat Roth IRA qualifications. You can open a nondeductible IRA to transfer into a back-door Roth IRA later.
2023 IRA Phase-Out Limits Chart
| Filing Status | Modified AGI | Deduction |
|---|---|---|
| Single or head of household | $73,000 or less | Full deduction up to the amount of your contribution limit |
| More than $73,000 but less than $83,000 | Partial deduction | |
| $83,000 or more | No deduction. | |
| Married filing jointly or qualifying widow(er) | $116,000 or less | Full deduction up to the amount of your contribution limit |
| More than $116,000 but less than $136,000 | Partial deduction | |
| $136,000 or more | No deduction | |
| Married filing separately | Less than $10,000 | Partial deduction |
| $10,000 or more | No deduction | |
| If you file separately and did not live with your spouse at any time during the year, your IRA deduction is determined under the "Single" filing status. | ||
Roth IRA Income Limits
The IRS has specific income restrictions that determine who can contribute to Roth IRAs.
Income limits based on your Roth IRA eligibility phase out for single filers with a MAGI between $138,000 and $153,000, and between $218,000 and $228,000 for married couples who file jointly.
If you exceed these income limits, you may want to consider contributing to a non-deductible traditional IRA, which allows you to contribute up to the $6,000 IRA limit each year. You can roll these contributions in to a Roth IRA later.
2023 Roth IRA Income Limits Chart
| Filing Status | Modified AGI | Allowable Contribution |
|---|---|---|
| Married filing jointly or qualifying widow(er) | $218,000 or less | Up to the annual contribution limit |
| More than $218,000 but less than $228,000 | Partial amount | |
| $228,000 or more | No contribution | |
| Married filing separately and you lived with your spouse at any time during the year | Less than $10,000 | Reduced amount |
| $10,000 or more | No contribution | |
| Single, head of household or married filing separately and you did not live with your spouse at any time during the year | $138,000 or less | No contribution |
| More than $138,000 but less than $153,000 | Partial contribution | |
| $153,000 or more | No contribution |
Did You Contribute Too Much to Your IRA?
Deduction and phase-out limits may affect your ability to make contributions. Here’s what happens if you contribute too much to an IRA.
IRA Contribution Deadlines
Tax season is a great reminder to make retirement account contributions if you didn’t do it throughout the previous calendar year. You can make Roth and traditional IRA contributions for the previous tax year until the tax filing deadline in April, according to the Internal Revenue Code.
However, you may need to specify the tax year you want to contribute. You can choose to contribute to the last year’s or the current year’s IRA limit between Jan. 2 and April 15.
More Information About IRAs
Individual Retirement Arrangements (IRAs) are great investment vehicles. Benefits you receive from tax deferrals are a great way to grow your investments.
If possible try to max out your IRA investment each year.
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