For the 2024 tax year, the maximum contribution amount to individual retirement accounts (IRAs) is $7,000. You can add $1,000 more to your contribution if you are 50 years of age or older, for a total of $8,000 This includes contributions for both Roth IRAs and traditional IRAs. However, there are limitations that may have an impact on your ability to make contributions and claim certain tax deductions.
The answer is a bit nuanced, but yes, you can still contribute to a traditional IRA even if you make over $200,000. However, there are some important things to keep in mind:
1. You may not be able to deduct the full amount of your contribution.
The amount of your traditional IRA contribution that you can deduct on your taxes depends on your income and whether you are covered by a retirement plan at work. Here’s a breakdown:
| Filing Status | 2023 MAGI | 2024 MAGI | Deduction Limit |
|---|---|---|---|
| Single, Head of Household, Qualifying Widow(er), Married Filing Jointly or Separately (and you didn’t live with your spouse at any time during the year) | Any amount | Any amount | Full deduction up to the amount of your contribution limit |
| Married Filing Jointly or Qualifying Widow(er) (and you’re covered by a plan at work) | $116,000 or less | $123,000 or less | Full deduction up to the amount of your contribution limit |
| $116,000 to $136,000 | $123,000 to $143,000 | Partial deduction | |
| $136,000 or more | $143,000 or more | No deduction | |
| Married Filing Jointly (and your spouse is covered by a plan at work) | $218,000 or less | $230,000 or less | Full deduction up to the amount of your contribution limit |
| $218,000 to $228,000 | $230,000 to $240,000 | Partial deduction | |
| More than $228,000 | More than $240,000 | No deduction | |
| Single or Head of Household (and you’re covered by a plan at work) | $73,000 or less | $77,000 or less | Full deduction up to the amount of your contribution limit |
| $73,000 to $83,000 | $77,000 to $87,000 | Partial deduction | |
| More than $83,000 | More than $87,000 | No deduction | |
| Married Filing Separately (and either spouse is covered by a plan at work) | Less than $10,000 | Less than $10,000 | Partial deduction |
| $10,000 or more | $10,000 or more | No deduction |
For example, if you are single and your MAGI is $220,000 in 2024, you can still contribute to a traditional IRA, but you will not be able to deduct any of your contribution on your taxes.
2. You may still be eligible for the saver’s credit.
The saver’s credit is a tax credit for low- and moderate-income individuals who contribute to a retirement account, including a traditional IRA. The credit is worth 10%, 20%, or 50% of your contributions, up to a maximum of $2,000 ($4,000 if you are married filing jointly).
To be eligible for the saver’s credit, you must have an AGI below certain limits, which vary depending on your filing status. For 2024, the income limits are:
| Filing Status | AGI Limit |
|---|---|
| Married Filing Jointly | $46,000 |
| Head of Household | $34,500 |
| All Other Filers | $23,000 |
3. You can still contribute to a Roth IRA, even if you make over $200,000.
Roth IRAs are funded with after-tax dollars, so you don’t get a tax deduction for your contributions. However, the earnings on your Roth IRA grow tax-free, and you can withdraw them tax-free in retirement.
There are income limits for Roth IRAs, but they are higher than the income limits for traditional IRAs. For 2024, the income limits for Roth IRAs are:
| Filing Status | MAGI Limit |
|---|---|
| Married Filing Jointly or Qualifying Widow(er) | $230,000 |
| Single, Head of Household, or Married Filing Separately (and you didn’t live with your spouse at any time during the year) | $146,000 |
| Married Filing Separately (if you lived with your spouse at any time during the year) | $10,000 |
4. You can use a backdoor Roth IRA.
A backdoor Roth IRA is a strategy that allows high-income earners to contribute to a Roth IRA, even if they make too much money to contribute directly. To do a backdoor Roth IRA, you first contribute to a non-deductible traditional IRA, and then you convert that IRA to a Roth IRA.
There are some potential tax implications to consider with a backdoor Roth IRA, so it’s important to talk to a tax advisor before you do one.
Here are some additional things to keep in mind:
- The contribution limit for traditional and Roth IRAs is $7,000 in 2024, or $8,000 if you are 50 or older.
- You can contribute to a traditional IRA until the tax filing deadline for the year. For example, the deadline to contribute to a traditional IRA for 2023 is April 15, 2024.
- If you contribute too much to a traditional IRA, you will have to pay a 6% penalty on the excess contribution.
- There are no income limits for SEP IRAs and solo 401(k) plans.
Even if you make over $200,000, you still have options for saving for retirement. You can contribute to a traditional IRA, a Roth IRA, or a SEP IRA or solo 401(k) plan. You may not be able to deduct the full amount of your contribution on your taxes, but you will still be able to grow your retirement savings tax-free.
Here are some additional resources that you may find helpful:
- IRS Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs)
- IRS Publication 502, Medical and Dental Expenses
- IRS Publication 970, Tax Benefits for Education
Disclaimer:
I am an AI chatbot and cannot provide financial advice. The information provided above is for general knowledge and informational purposes only, and does not constitute professional financial advice. It is essential to consult with a qualified financial advisor for any financial decisions.
IRA Contribution Limits
The amount that you can contribute to any retirement account, including an IRA, is limited, as mentioned above. The Internal Revenue Service (IRS) sets these annual ceilings and adjusts them for inflation.
For both traditional and Roth IRAs, the maximum contribution amount for 2024 is:
- $7,000 if youre younger than age 50
- $8,000 if youre age 50 or older
For both kinds of IRAs, the maximum contribution amount for 2023 is:
- $6,500 if youre younger than age 50
- $7,500 if youre age 50 or older
You can make contributions to an IRA up until the following year’s filing deadline. Thus, until Monday, April 15, 2024, you can make contributions to your IRA for 2023. The maximum contribution for 2023 is $6,500, but it is $7,500 if you are 50 years of age or older.
You Can Only Contribute Earned Income
You must have earned income to contribute to an IRA. There are two ways to earn money: either work for someone else and be paid, or own or operate a farm or business. The table below highlights the IRS list of items that are included and excluded from earned income.
| Whats Included and Excluded from Earned Income | |
|---|---|
| Included | Excluded |
| Wages and Salaries | Earnings and Profits From Property |
| Commissions | Interest Income |
| Tips | Dividend Payments |
| Self-Employment Income | Pensions |
| Taxable Alimony and Separation Settlements | Annuity Income |
| Taxable Non-Tuition Fellowships | Deferred Compensation |
| Stipend Payments | Income from Some Partnerships |
| Non-Taxable Combat Pay | Amounts Excluded from Income |
Income from separation and alimony settlements is regarded by the IRS as earned income if the decrees are executed on or before December 31, 2018. Partnership income is not included if the services you rendered resulted in no tangible profit. Amounts excluded from your income may include any foreign-earned income.
You can make an IRA contribution of up to $7,000 in 2024, or $8,000 if you’re 50 years of age or older. The contribution cap for 2023 is $6,500, or $7,500 if you are 50 years of age or older. However, you need to make enough money to pay for the contribution.
Only the amount of your earned income may be contributed if your total earned income for the year exceeds the contribution cap. For instance, you could contribute up to $3,000 if your income was $3,000.
What To Do When You’re Over the Roth IRA Income Limits!
FAQ
Is there an income limit for contributing to a traditional IRA?
Can I contribute to an IRA if I make over $200000?
What happens if I contribute to a traditional IRA and my income is too high?
Can I contribute to an IRA if I’m not working?
How much can you contribute to a traditional IRA?
Although there is no overall limit for contributing to a traditional IRA, there are income limits on tax-deductible contributions. In other words, if you want to claim a tax deduction equaling the amount of your contribution in the year you invest the funds in your traditional IRA, your income must be below a certain threshold.
How much can a traditional IRA contribute in 2024?
The maximum annual traditional IRA contribution limit is $7,000 in 2024 ($8,000 if age 50 or older). Traditional IRA contributions may be tax-deductible in the year they are made, depending on your modified gross income (MAGI) and whether you’re covered by an employer retirement plan.
What are the income limits for a traditional IRA?
These income limits for traditional IRAs apply only if you (or your spouse) have a retirement plan at work. Single or head of household (and covered by retirement plan at work) $73,000 or less. $77,000 or less. Full deduction. More than $73,000, but less than $83,000. More than $77,000, but less than $87,000.
How much can you contribute to a Roth IRA?
The annual contribution limit for 2015, 2016, 2017 and 2018 is $5,500, or $6,500 if you’re age 50 or older. Your Roth IRA contributions may also be limited based on your filing status and income. See IRA Contribution Limits. Is my IRA contribution deductible on my tax return?