Individual Retirement Arrangements (IRAs) are way to save money towards retirement that also saves on taxes. Each year, an individual’s total contributions to both traditional and Roth IRAs cannot be more than a certain dollar limit. If you are age 50+ at some time during the year, you can also contribute an additional amount. (You can’t contribute more than your taxable compensation for the year.)
Note that there are also income restrictions on Roth IRA contributions, although you may be able to get around these income restrictions with a Backdoor Roth IRA (non-deductible Traditional IRA + Roth conversion).
If your income is low enough (less than $63,000 AGI for married filing joint), the Saver’s Credit can get you back 10% to 50% of your contribution (of up to $2,000 per person) when you file your taxes.
Since I enjoy visual aides, here’s an updated historical chart and table of contribution limits for the last 10 years. I’m happy to say that we’ve both done the max since 2004. Have you been taking advantage of your potential IRA tax break?
|Year||IRA Contribution Limit||Additional Catch-Up Allowed (Age 50+)|
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Read More: Historical IRA Contribution Limits 2009-2018