Titan Crypto is coming!
Join the Waitlist
HomeStrategiesResearchArticlesFAQTeamBlogLogin
Table of contents
Annual contribution limits to IRAsIncome limits for Roth and traditional IRA contributionsRoth and Traditional IRA income limits: 2020 vs 2021Excess IRA contributionsExceptions to IRA contribution limitsWhat is the saver’s credit?The bottom line
IRA tax preparation

An individual retirement account (IRA) can be a tax-efficient vehicle for retirement savings, but it’s not a free-for-all when it comes to contributing funds. Investors must adhere to the IRS’s annual contribution limit, which may change from year to year. Restrictions and exceptions could also impact how much individuals may contribute. 

Annual contribution limits to IRAs

The maximum IRA contribution limit for 2021 depends on investors’ age, and these rules apply to traditional and Roth IRAs.

  • Regular contributions. Individuals 49 or younger may contribute as much as $6,000 each year. 
  • Catch-up contributions. Individuals 50 or older can make a catch-up contribution up to $1,000, bringing their total IRA max contribution limit to $7,000.

It’s important to note these are combined limits across traditional and Roth IRAs. An investor eligible to make the maximum contribution may not invest $6,000 in their traditional IRA, and another $6,000 in their Roth IRA. The $6,000 limit applies to the sum of their contributions to traditional and Roth IRAs.

Income limits for Roth and traditional IRA contributions

Age isn’t the only factor that can impact maximum annual contributions. Traditional and Roth IRAs each have unique rules that could limit how much an individual invests every year. 

Traditional IRA income limits 

When investing in a traditional IRA, contributions up to the annual limit can be used as a tax deduction. However, the amount that may be deducted could be reduced or eliminated altogether depending on an individual’s access to an employer savings plan. For married couples, the amount may be reduced if a spouse is covered by a retirement plan at work. Those whose income is above the limit may still contribute to an IRA, but the contribution isn’t tax-deductible.

Single/Head of household, and you are covered by a 401(k) or other workplace retirement plan

  • If your annual modified AGI is $66,000 or less, you can take a full deduction up to the annual contribution limit. 
  • If your annual modified AGI is between $66,001 and $76,000, you can take a partial deduction.
  • If your annual modified AGI is above $76,000, you cannot take a deduction.

Married filing jointly/qualified widower, and you are covered by a 401(k) or other workplace retirement plan 

  • If your annual modified AGI is $105,000 or less, you can take a full deduction up to the annual contribution limit. 
  • If your annual modified AGI is between $105,001 and $125,000, you can take a partial deduction.
  • If your annual modified AGI is above $125,000, you cannot take a deduction.

Married filing jointly/qualified widower, and you are not covered by a 401(k) or other workplace retirement plan, but your spouse is

  • If your annual modified AGI is $198,000 or less, you can take a full deduction up to the annual contribution limit. 
  • If your annual modified AGI is between $198,001 and $208,000, you can take a partial deduction.
  • If your annual modified AGI is above $208,000, you cannot take a deduction.

Married filing separately, and you or your spouse are covered by a 401(k) or other workplace retirement plan 

  • If your annual modified AGI is $10,000 or less, you can take a partial deduction. 
  • If your annual modified AGI is above $10,000, you cannot take a deduction.

Roth IRA income limits 

Money contributed to a Roth IRA is not tax-deductible.Rather, it is fully taxed at the individual’s income tax rate. Withdrawals made during retirement, including all investment earnings, are tax-free. 

Contribution limits for a Roth IRA depend on the individual’s filing status and income. Each tax filing status has an income limit based on modified adjusted gross income (MAGI). Those who earn more than that can’t contribute to a Roth IRA account.

Single/Head of household

  • If your annual modified AGI is $120,000 or less, you can contribute the maximum 
  • If your annual modified AGI is between $120,001 and $140,000, you can make a reduced contribution.
  • If your annual modified AGI is above $140,000, you cannot contribute to a Roth IRA.

Married filing jointly/qualified widower 

  • If your annual modified AGI is $198,000 or less, you can contribute the maximum. 
  • If your annual modified AGI is between $198,001 and $208,000, you can make a reduced contribution.
  • If your annual modified AGI is above $208,000, you cannot contribute to a Roth IRA.

Married filing separately

  • If your annual modified AGI is $10,000 or less, you can make a reduced contribution.
  • If your annual modified AGI is above $10,000, you cannot contribute to a Roth IRA.

Roth and Traditional IRA income limits: 2020 vs 2021

The IRS may change the income and contribution limits for future tax years to account for inflation and increases in cost of living. Between 2020 and 2021, the IRS made two major changes that affected all tax filing statuses. 

  • Increased income limits for traditional IRA deductions. The IRS raised income limits for traditional IRA deductions, allowing more people to qualify under the new phase-out ranges. 
  • Increased income limits for Roth IRA contributions. The IRS also increased the income limits and phase-out ranges for Roth IRAs. Individuals previously on the cusp of qualifying may now find they’re eligible. 

Excess IRA contributions

The IRS charges a 6% tax on excess contributions each year the money remains in an IRA. To avoid this fee, excess contributions and earnings on those contributions must be withdrawn before the federal tax deadline. Applying excess contributions to later years is also possible, if certain requirements are met.

Disclosures

Certain information contained in here has been obtained from third-party sources. While taken from sources believed to be reliable, Titan has not independently verified such information and makes no representations about the accuracy of the information or its appropriateness for a given situation. In addition, this content may include third-party advertisements; Titan has not reviewed such advertisements and does not endorse any advertising content contained therein.

This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any strategy managed by Titan. Any investments referred to, or described are not representative of all investments in strategies managed by Titan, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results.

Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see
Titan’s Legal Page for additional important information.

Become a Titan investor today.
Create an account with us in two minutes.
JOIN NOW

Exceptions to IRA contribution limits

There are two exceptions to IRA contribution limits. The first is that individuals may not invest more than they earn in a year. So if someone works a few contract jobs and earns $3,500 annually, that would be their personal limit. 

There’s also an exception for non-working spouses. An individual who doesn’t earn an income may open a spousal IRA and make contributions using their spouse’s earnings. As long as both individuals meet the other requirements for a traditional or Roth IRA, each may contribute up to the annual limit. 

What is the saver’s credit?

Low and moderate income taxpayers may qualify for a saver’s credit by contributing to an IRA or workplace retirement plan. Depending on income levels, an individual could earn a tax credit that amounts to 10%, 20%, or 50% of their IRA contribution. The maximum credit is $1,000. Individual filers may earn the credit on up to $2,000 in contributions. Married taxpayers who file jointly may earn the credit on up to $4,000 in contributions. 

The bottom line

An IRA offers tax advantages on the road to retirement, but it’s important for investors to understand the guidelines and contribution limits to avoid ongoing penalties from the IRS. 

Investing well for retirement is a crucial act. At Titan, our expert investment analysts steward your capital through actively-managed, high growth-potential portfolios. Sign up takes minutes, and our Client Experience team is here to help you step-by-step as you migrate your retirement funds over to Titan. Get started today.

Disclosures

Certain information contained in here has been obtained from third-party sources. While taken from sources believed to be reliable, Titan has not independently verified such information and makes no representations about the accuracy of the information or its appropriateness for a given situation. In addition, this content may include third-party advertisements; Titan has not reviewed such advertisements and does not endorse any advertising content contained therein.

This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any strategy managed by Titan. Any investments referred to, or described are not representative of all investments in strategies managed by Titan, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results.

Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see
Titan’s Legal Page for additional important information.

Become a Titan investor today.
Create an account with us in two minutes.
JOIN NOW

Keep reading