The contribution limits for Traditional and Roth IRAs is $6,000 for 2019. The contribution limit will be the same for 2020.
Individuals who are 50 or older are eligible to make an additional “catch-up” contribution in the amount of $1,000 for a total contribution of $7,000.
Keep in mind a few restrictions when contributing to IRAs:
1. You must have earned income (not just investment income). If your spouse has earned income but you do not, you may be able to fund a “Spousal IRA.”
2.Roth contributions are subject to income thresholds and are determined based upon your filing status and your Modified Adjusted Gross Income (MAGI).
3. Pre-tax Traditional IRA contributions are subject to income thresholds as well. The threshold is based on filing status, Modified Adjusted Gross Income (MAGI) and whether or not you (or your spouse) is “covered” by an employer-sponsored retirement plan or not “covered.”
If you are not eligible to contribute directly to a Roth IRA or pre-tax Traditional IRA, consider funding an after-tax Traditional IRA, especially if there may be an opportunity to subsequently convert the after-tax contribution to a Roth IRA.
Finally, note that $6,000 (or $7,000 with the catch-up) is the aggregate contribution amount. If you are 40 years old and only eligible to contribute $2,000 to a Roth IRA, the remaining $4,000 can likely be contributed to an after-tax Traditional IRA.
——
The articles presented on this blog are general in nature and should not be assumed to be applicable to your situation. In addition, tax law changes daily and the articles on this blog are not updated to reflect these changes. Anyone receiving any part of the information on this blog should not rely on or act or refrain from acting on the basis of any matter or information contained in this blog without seeking appropriate tax, legal or other professional advice. The transmission and receipt of information contained on this blog does not form or constitute a client relationship. Nothing in this blog constitutes legal advice. Opinions rendered by tax professionals are not authority. You agree to hold Asheville, NC-based CPA and Enrolled Agent Brendan Willmann forever harmless from any liability for your use or failure to use the information, advice, referrals, or suggestions provided by this blog at any time.
Discussion
Comments are disallowed for this post.
Comments are closed.