2015 IRA Contribution Limits

In conjunction with the annual Cost of Living Adjustment calculations, the Internal Revenue Service (IRS) has announced that there will be no changes to the annual contribution limits and additional catch-up contribution limits for Individual Retirement Arrangements (IRA).

Contribution Limits

The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.

Deductibility for Traditional IRAs

If you contribute to a traditional IRA, you may be eligible to deduct your contributions when calculating your federal income tax liability.  Whether or not you are eligible for the deduction is based on two factors:  whether you have a qualified workplace retirement plan, and your modified Adjusted Gross Income (AGI).  Under IRS regulations, military service members (including reservists activated for 90 days or more) are considered to be covered by a qualified workplace retirement plan.

For single and head of household taxpayers who are covered by a workplace retirement plan, a traditional IRA contribution is fully deductible if the AGI is less than $61,000.  If the AGI is between $61,000 and $71,000, a portion of the traditional IRA contribution is tax-deductible (see the IRS worksheets for exact amounts.)  Single and head of household taxpayers who have a modified AGI greater than $71,000 are not eligible to deduct their traditional IRA contributions.  (Hint:  put it in a Roth IRA instead.)

Single and head of household taxpayers who are NOT covered by a qualified workplace retirement plan may deduct their full traditional IRA contribution regardless of their AGI.

For married couples filing jointly, there are two sets of limits, depending on which person is covered by a qualified workplace retirement plan and which person is making the IRA contribution.

For married couples filing jointly, if the spouse who is covered by a qualified workplace retirement plan is also the spouse who makes the traditional IRA contribution, the contribution is fully deductible if the couple’s joint AGI is less than $98,000.  For joint AGIs between $98,000 and $118,000, only a portion of the traditional IRA contribution will be deductible.  If the couple’s joint AGI is greater than $118,000, then the traditional IRA contribution is not deductible.  (Same hint:  put it in a Roth IRA instead.)

For married couples filing jointly, if the spouse who is covered by the qualified workplace retirement plan is NOT the spouse who makes the traditional IRA contribution, the contribution is fully deductible of the couple’s joint AGI is less than $183,000.  For  joint AGI between $183,000 and $191,000, the traditional IRA contribution will be partially deductible.  Traditional IRA contributions will not be deductible for AGI  greater than $191,000.

Married couples filing jointly may fully deduct traditional IRA contributions if neither spouse is covered by a qualified workplace retirement plan.

For a married individual filing a separate return, who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

Eligibility for Roth IRAS

Eligibility to contribute to a Roth IRA is limited for higher-income earners.

For single or head of household taxpayers, you may contribute up to the 2015 contribution limit of $5,500 ($6,500 for taxpayers aged 50 and older) if your AGI is less than $116,000.  For AGIs between $116,000 and $131,000, contributions are limited based upon the IRS worksheet.  Single or head of household taxpayers with an AGI greater than $131,000 are not eligible to make Roth IRA contributions.

Married taxpayers who file jointly may contribute up to the 2015 contribution limit of $5,500 EACH ($6,500 for taxpayers aged 50 and older) if the joint AGI is less than $183,000.  For joint AGIs between $183,000 and $193,000, contribution are limited based upon the IRS worksheet.  Married filing joint taxpayers with joint AGI greater than $193,000 are not eligible to make Roth IRA contributions.

The Saver’s Credit

The AGI limits for the saver’s credit (also known as the retirement savings contribution credit) have also increased for 2105.  This tax credit is simply amazing.  If your AGI falls below these limits, you would be ridiculous not to contribute to a qualified, tax-advantaged retirement savings account.

Single taxpayers, and married taxpayers filing separately, are eligible for this tax credit if their AGI is below $30,500.

Head of household taxpayers are eligible for this tax credit if their AGI is below $45,750.

Married couples filing jointly will be eligible for this tax credit if their AGI is below $61,000.

While writing this, I had a lot of thoughts.  I remember being young and broke and wondering how we could contribute even $50 a month to an IRA.  As we move through our working lives, I wish we had contributed more when we were younger .  (Especially when we would have been eligible for the saver’s credit, had it existed back then.)  However, the most important thing is to look toward the future.  Squeeze your budget to contribute as much as possible to your IRA accounts.  Even if it seems hard, early contributions are the key to building large balances over time.

Just do it!

Check out the 2015 Thrift Savings Plan contribution plan limits, too!

 

About the Author

Kate Horrell
Kate Horrell is a military financial coach, mom of four teens, and Navy spouse. She has a background in taxes and mortgage banking, and a trove of experience helping other military families with their money. Follow her on twitter @realKateHorrell.