How much can I contribute?
For the 2021 and 2022 tax years, you can contribute the lesser of $6,000 (or $7,000 if you’re age 50 or older by the end of the year) or your taxable compensation for the year. This is the maximum amount you can contribute across all your traditional and Roth IRAs. Note that Roth contributions may be limited if your earnings exceed certain limits. See below for details.
Can my spouse contribute?
Even if your spouse doesn’t work, he or she can contribute to an IRA if you’re a wage-earner. But there are limitations.
Again, you can’t contribute more than you make in taxable compensation. But if you make over $12,000 (or $14,000 if you both are 50 or over), you may be able to contribute the full amount for each of you to a traditional IRA. In other words, for those under 50, that would come to $6,000 per spouse for a total of $12,000 for 2021 and 2022.
However, keep in mind that you can’t contribute the maximum to a traditional IRA and still contribute to a Roth IRA. If you and your spouse contribute the maximum of $12,000 (or $14,000 if you both are age 50 or over) to traditional IRAs, you would not be able to contribute to a Roth IRA during the same tax year.
When should I make contributions?
Contributions can be made to your IRAs at any time during the calendar year and as late as the due date for filing your tax return (which is usually on or around April 15 of the following year). (See: Saving to your IRA now could make a big difference later)
That means that even if you haven’t yet made an IRA contribution, you have until the April tax filing deadline to still make the contribution for this year. That could reduce your taxes on your previous year’s returns.
Are there age restrictions?
Working individuals may continue to contribute to their IRA for as long as they have earned income. This represents a change in the tax law as part of the SECURE Act of 2020. There are also no age restrictions for contributions to Roth IRAs. (See: SECURE Act alters retirement investing options for individuals and businesses)
Are there upper income restrictions?
There are no upper income limitations on contributing to a traditional IRA, although there are income restrictions for taking a deduction for your IRA contribution if you or your spouse are participating in an employer plan at work.
Limitations to qualify for a deduction on your traditional IRA contributions
Married filing jointly, with a workplace plan: For 2021, phase out starts at $105,000 with no deduction at $125,000. For 2022, phase out starts at $109,000 with no deduction at $129,000 and above.
Married, filing jointly, without a workplace plan (but your spouse participates in a plan): For 2021, phase out starts at $198,000 with no deduction at $208,000. For 2022, phase out starts at $204,000 with no deduction at $214,000 and above.
Single and head of household, covered by workplace retirement plan: For 2021, phase out starts at $66,000 with no deduction at $76,000. For 2022, phase out starts at $68,000 with no deduction at $78,000 or above.
Married, filing separately: Phase out starts at $0 with no deduction at $10,000 or above. (If you make deductible traditional IRA contributions and also request a qualified charitable distribution (QCD), the QCD amount will be reduced by the amount of the traditional IRA deductions.)
Roth IRA contributions
If you earn above these income restrictions and you still want to contribute to an IRA, opening a Roth IRA may be a better option than a traditional IRA if you meet the Roth income limits.
Although a Roth IRA wouldn’t provide a tax benefit for the current year, it would grow tax-deferred, and you would have the benefit of tax-free qualified withdrawals later, whereas traditional IRA withdrawals are taxed.
For tax-free withdrawals of investment gains within a Roth IRA, withdrawals must be taken after age 59½ and after a five-year holding period. There are exceptions, such as a first-time home purchase (up to $10,000), disability, or pay-outs to a beneficiary. The penalty may also be waived prior to 59½ for higher education expenses, birth or adoption ($5,000 limit), medical premiums, and substantially equal periodic payments (SEPP).
For a Roth IRA, single filers must have a Modified Adjusted Gross Income (MAGI) under $140,000 in 2021 and under $144,000 for tax year 2022. Contributions would be reduced on a sliding scale with MAGI between $125,000 and $140,000 for 2021 and between $129,000 and $144,000 for 2022.
Married couples filing jointly must have MAGI under $208,000 in 2021 and under $214,000 in 2022 to qualify for a Roth IRA. Contributions would be reduced on a sliding scale with MAGI between $198,000 and $208,000 in 2021 and between $204,000 and $214,000 in 2022.
The following table lays out the income limitations for your eligibility for contributing to a Roth IRA.