IRA Contribution and Deduction Limits for 2019 and 2020
An individual retirement arrangement, often known as an individual retirement account and shortened to IRA, can provide you with a tax benefit as you save for retirement.
However, the IRA contribution limits and income limits can change over time. Double-check the IRA limits for 2019 and 2020, and learn how to correct excess contributions if you made a mistake.
Traditional and Roth IRA Contribution Limits
IRA contribution limits increased in 2019, but remain the same for 2020. The annual contribution amount is $6,000 for both traditional and Roth IRAs.
If you’re 50 or older, you can contribute an additional $1,000 (for $7,000 total) in 2019 and 2020. However, if you’re 70½ or older, you can’t contribute to a traditional IRA anymore.
| Traditional IRA | Roth IRA | |
|---|---|---|
| 2019 Contribution Limit | $6,000 | $6,000 |
| 2020 Contribution Limit | $6,000 | $6,000 |
| Additional catch-up contribution if you’re 50 or older on the last day of the year | $1,000 | $1,000 |
You can make contributions for the calendar year up until the tax filing deadline for that year. For example, you have until April 15, 2020, to make your 2019 contributions.
Once 2020 starts, you’ll have to specify whether you want your contribution to be for the 2019 or 2020 tax year, which you’ll do with the company that manages your IRA. The company will also send you and the IRS copies of the tax Form 5498 with your contribution amount for each year.
Traditional and Roth IRA Deduction and Income Limits
Your income, tax filing status, and access to other retirement plans can also impact your options with IRAs.
For the income-related limitations, you’ll want to know your modified adjusted gross income (MAGI), which is your income minus certain deductible expenses. Your MAGI may be higher than your adjusted gross income (AGI), as certain deductions lower your AGI, but aren’t included in your MAGI.
With traditional IRAs, you can contribute up to the full amount regardless of your income. However, the tax deduction you can take is limited based on your MAGI and whether you (or your spouse) have access to a retirement plan from an employer.
Traditional IRA Deduction Limits for 2019 and 2020
| Filing Status | MAGI for 2019 | MAGI for 2020 | Deductible Amount |
|---|---|---|---|
| Single and Head of Household | ≤ $64,000 | ≤ $65,000 | The annual limit |
| > $64,000 but < $74,000 | > $65,000 but < $75,000 | Less than the annual limit | |
| ≥ $74,000 | ≥ $75,000 | $0 | |
| Married Filing Jointly and Qualifying Widow(er) | ≤ $103,000 | ≤ $104,000 | The annual limit |
| > $103,000 but < $123,000 | > $104,000 but < $124,000 | Less than the annual limit | |
| ≥ $123,000 | ≥ $124,000 | $0 | |
| Married Filing Jointly (if only your spouse has access to a retirement plan at work) | ≤ $193,000 | ≤ $196,000 | The annual limit |
| > $193,000 but < $203,000 | > $196,000 but < $206,000 | Less than the annual limit | |
| ≥ $203,000 | ≥ $206,000 | $0 | |
| Married Filing Separately* | < $10,000 | < $10,000 | Less than the annual limit |
| ≥ $10,000 | ≥ $10,000 | $0 |
*Use the single status limits if you use the married filing separately tax status and didn’t live with your spouse at any time during the year.
For Roth IRAs, you won’t receive a tax deduction because you’re contributing post-tax money. The contributions will still appear on IRS Form 5498 and may qualify some low- to moderate-income earners for the saver’s tax credit.
Moderate to high-income earners may be limited in how much they can contribute to a Roth IRA each year based on their MAGI and tax filing status.
Roth IRA Contribution Limits for 2019 and 2020
| Filing Status | MAGI for 2019 | MAGI for 2020 | Contribution Amount |
|---|---|---|---|
| Single and Head of Household | < $122,000 | < $124,000 | The annual limit |
| > $122,000 but < $137,000 | > $124,000 but < $139,000 | Less than the annual limit | |
| > $137,000 | > $139,000 | $0 | |
| Married Filing Jointly and Qualifying Widow(er) | < $193,000 | < $196,000 | The annual limit |
| > $193,000 but < $203,000 | > $196,000 but < $206,000 | Less than the annual limit | |
| > $203,000 | > $206,000 | $0 | |
| Married Filing Separately* | < $10,000 | < $10,000 | Less than the annual limit |
| > $10,000 | > $10,000 | $0 |
*Use the single status limits if you use the married filing separately tax status and didn’t live with your spouse at any time during the year.
If your MAGI is too high to qualify for a Roth IRA, you may still be able to contribute to a traditional IRA and then move the money into a Roth IRA.
While the rollover IRA option may mean paying more taxes on the money now, it could be a good way to diversify your retirement savings. With a Roth IRA, you’ll get tax-free growth on your investments and won’t have to take required minimum distributions from the account later.
How to Correct Excess Contributions
The IRA contribution limits are the combined total for both traditional and Roth IRA accounts.
If you’ve contributed more than you’re allowed for the year, you’ve made “excess” contributions and may have to pay a steep penalty—six percent of the excess amount every year. This could happen if you misread the limit, forgot about a contribution, marked the wrong year on your contribution form, or contributed early in the year and wound up with a higher MAGI than you expected.
There are several ways to avoid or minimize penalties from excess contributions:
- Withdraw the excess amount (and any earnings from that amount) before the tax filing deadline, which is usually April 15. Or, if it’s after April 15, withdraw the excess amount before Oct. 15 and file an amended tax return. You’ll avoid the six percent penalty, but if you’re younger than 59½, you may need to pay a 10% early withdrawal penalty on the earnings.
- Pay the six percent penalty and reduce your IRA contributions next year by your excess contribution amount.
- Pay the six percent penalty and withdraw the excess contribution (but you can leave the earnings in) by Dec. 31 of the next year.
Plan Ahead to Avoid Mistakes
Planning ahead and making sure you only contribute what you’re allowed to each year is easier than correcting a mistake later. Check for updates as the amounts can vary from year to year, and keep these limits in mind as you plan for retirement. If you budget with Quicken, you can connect your retirement accounts to quickly see how much you’ve contributed each year.
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