2020 IRA contribution rules and limits

02/11/2020

By Gene Walden, Senior Finance Editor | 02/11/2020

Here are the 2019 and 2020 rules and contribution limits to help you get the most out of your IRA:

Who qualifies?

You can contribute to an IRA if you (or your spouse, if filing jointly) have “taxable compensation,” also known as “earned income.” The following table shows what types of income would be considered “taxable compensation” and which types would not.

Compensation for Purposes of an IRA

Includes:

wages, salaries, etc.
commissions
self-employment income
nontaxable combat pay

Does Not Include:

earnings and profits from property
interest and dividend income
pension or annuity income
deferred compensation
income from certain partnerships
any amounts you exclude from income
alimony and separate maintenance*

* Alimony and separate maintenance do not count as earned income for divorces as of 1/1/2019 or before that but if modified after 1/1/2019.

How can I contribute?

For the 2019 and 2020 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 2019 and 2020.

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: Contributing Earlier to Your IRA Can Make a Big Difference Over Time)

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. However, this applies to taxable years after December 31, 2019. For the 2019 tax year, individuals who were 70 ½ or over would not be allowed to contribute to a traditional IRA for 2019. There are 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 when contributing to both an IRA and a 401(k) or similar retirement plan at work.

What are the limitations for qualifying for a deduction on your traditional IRA contributions?

Married filing jointly, with a workplace plan: Phase out starts at $104,000 with no deduction at $124,000 and above.

Married, filing jointly, without a workplace plan: Phase out starts at $196,000 with no deduction at $206,000 and above.

Single: Phase out starts at $122,000 with no deduction at $137,000 or above.

Single, covered by workplace retirement plan: phase out starts at $65,000 with no deduction at $75,000 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.)

If you earn above these income restrictions and you still want to contribute to an IRA, opening a Roth 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.

The following table lays out the income limitations for your eligibility for contributing to a Roth IRA.

Married and filing jointly or qualifying widow(er)	Your modified adjusted gross income	What you can contribute to a Roth IRA
	Less than $193,000 for 2019 and less than $196,000 in 2020	up to the limit
	Greater than or equal to $193,000 but less than $203,000 in 2019 and greater than or equal to $196,000 but less than $206,000 in 2020	a reduced amount
	Greater than or equal to $203,000 for 2019 and greater than or equal to $206,000 in 2020	zero
Married filing separately and you lived with your spouse at any time during the year	Your modified adjusted gross income	What you can contribute
	Less than $10,000 in 2019 and 2020	a reduced amount
	Greater than or equal to $10,000 in 2019 and 2020	zero
Single, head of household, or married filing separately and you did not live with your spouse at any time during the year	Your modified adjusted gross income	What can you contribute
	Less than $122,000 for 2019 and less than $124,000 in 2020	up to the limit
	Greater than $122,000 and less than $137,000 for 2019 and greater than $124,000 and less than $139,000 for 2020	a reduced amount
	Greater than or equal to $137,000 for 2019 and greater than or equal to $139,000 for 2020	zero

What are penalties for early withdrawal?

All contributions and earnings you withdraw from your traditional IRA are taxable. If you are under age 59 ½ you may also have to pay a 10% tax for early withdrawals, unless you qualify for an exception.

(See: Contribution and Deduction Limits & Rules for IRA and CESA)

Take advantage of tax contribution limits and Open a Thrivent Funds IRA today.

At Thrivent Mutual Funds, we recommend you consult your tax advisor to make sure you’re getting the most out of your investments. Thrivent Mutual Funds and their representatives cannot provide legal or tax advice.