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2014 IRA Contribution Limits

Contributing to an IRA every year helps prepare you for comfortable retirement while providing valuable tax benefits. Sometimes tax law can be intimidating, though, and you may be unsure exactly how much you’re allowed to invest. Here’s an explanation of the limits for 2014 and what conditions may affect your maximum allowable contributions.

What is an IRA and which type of IRA should I choose?

An Individual Retirement Account is a special account with a financial institution that lets you to save for retirement with either tax-free growth or tax-deferred benefits. The two types of individual retirement accounts that offer these advantages are Traditional IRAs and Roth IRAs. Before choosing between these investments, it’s important to understand the major differences:

Traditional IRAs

Contributions aren’t taxable until the money is withdrawn, generally during retirement years when taxable income is lower. You can only contribute to a traditional IRA until age 70½. Once you reach this age, you’re required to start taking minimum distributions.

Roth IRAs

Pay income tax on the funds you contribute up front, and then the IRA grows tax-free. When you withdraw the money, no income tax is due. You can contribute at any age and aren’t required to begin taking distributions at any specific time.

How much can I contribute for 2014?

For either a traditional or Roth IRA, here are the 2014 maximum contribution limits:

  • Age 49 and under: The lesser of your taxable compensation for the year or  $5,500.
  • Age 50 and over: The lesser of your taxable compensation for the year or $6,500.

These limits do not apply to rollover contributions or qualified reservist repayments.

Roth Limitations

Although they share the same general maximum contribution amounts as their traditional counterparts, Roth IRAs come with some additional limitations based on income:

Filing Status                                    Adjusted Gross Income      Maximum Contribution
Married filing jointly or qualified widow(er) Below $181,000 Up to the limit
Married filing jointly or qualified widow(er) $181,000 to $190,999 Reduced amount
Married filing jointly or qualified widow(er) $191,000 or more Zero
Married filing separately (living with spouse) Less than $10,000 Reduced amount
Married filing separately (living with spouse) $10,000 or more Zero
Single, head of household or married filing separately but not living with spouse Less than $114,000 Up to the limit
Single, head of household or married filing separately but not living with spouse Greater than $114,000 but less than $129,000 Reduced amount
Single, head of household or married filing separately but not living with spouse $129,000 or more Zero

Special considerations: Employer retirement plans

If your or your spouse has a 401(k) plan at work, this may reduce your maximum allowable IRA tax deduction depending on your income:

Single or Head of Household

  • Deduct up to the contribution limit if you earn up to $60,000.
  • Claim a partial deduction for earnings above $60,000 but less than $70,000.
  • No deduction allowed for earnings over $70,000.

Married filing jointly or qualified widow(er)

  • Deduct the contribution limit for earnings of $96,000 or less.
  • Receive a partial deduction for earnings above $96,000 but less than $116,000.
  • No deduction allowed for earnings over $116,000

Married filing separately

  • Receive a partial deduction for earnings less than $10,000.
  • No deduction allowed for earnings of $10,000 or more

Once you examine IRA tax laws, they really aren’t all that complicated or difficult to digest. Taking the time to understand contribution limits helps ensure your best tax advantages and financial comfort both now and during your retirement.


The content above is provided by a third party. Tradeking Advisors is not affiliated with this company and does not endorse the content mentioned above.
This is for informational purposes only and should not be considered tax or financial planning advice. Please consult a tax and/or financial professional for advice specific to your individual circumstances.

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