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2014 Traditional IRA Rules and Contribution Limits

Income Limits on Deductibility of 2014 IRA Contributions

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How much can you contribute to an IRA or ROTH IRA for the 2014 tax year?

  • $5,500 for those age 49 and under.
  • $6,500 for those age 50 and older.

These contribution amounts are the same as 2013; however some of the income limits that apply to determine if you can deduct all or some of the contribution have increased slightly. I cover those in a few paragraphs.

2014 IRA Contribution Deadline

You have until April 15th of 2015 to make your 2014 IRA contribution.

Earned Income Rules for 2014 Traditional IRA Contributions

You must have earned income to make an IRA contribution. The amount of earned income you have must equal or exceed the amount of your IRA contribution. This means if you are retired and no longer working, you may not make an IRA contribution, although you can still rollover or transfer money from a 401(k) to an IRA.

Note: If you have enough earned income, you may make an IRA contribution for a non-working spouse in addition to your own IRA contribution.

If you and/or your spouse participate in a company sponsored retirement plan, you may not be able to take a deduction for a contribution to your traditional IRA, although you can still make a non-deductible contribution. Income limitations apply to determine if you can deduct your IRA contribution. Those income limitations are listed below.

2014 Traditional IRA Income Limits When You or a Spouse Have a Company Sponsored Retirement Plan

If you participate in a company sponsored retirement plan, your IRA contribution may not be deductible.

  • For single filers who are covered by a company retirement plan in 2014 the deduction is phased out between $60,000 and $70,000 of modified adjusted gross income (MAGI).
  • For married filers if you are covered by a company retirement plan in 2014 the deduction is phased out between $96,000 and $116,000 of MAGI.
  • For married filers where you are not covered by a company plan but your spouse is - in 2014 the deduction for your IRA contribution is phased out between $181,000 and $191,000 of MAGI.

What does it mean to participate in a company sponsored plan? The IRS provides a concise description in Are You Covered by an Employer's Retirement Plan?

Non Deductible IRA Contributions

Even if your IRA contribution is not deductible you can still make a contribution. It is called a non-deductible IRA contribution, and the funds inside will grow tax deferred, until such time as you take a withdrawal.

Or you may be eligible to make a ROTH IRA contribution instead of a contribution to a Traditional IRA. Your total contributions to ROTH and Traditional IRAs cannot exceed the dollar limits above, meaning you could contribute to both, such as $2,000 to a Traditional IRA and $3,500 to a ROTH, but you can’t contribute the full amount to both. (IRA rollovers and transfers do not count toward the IRA contribution limit.)

See 2014 ROTH IRA Rules to see if you are eligible to make a ROTH IRA contribution.

Spousal IRA Contributions

You may make an IRA contribution for a non-working spouse who has no earned income, as long as you have enough earned income. This is called a spousal IRA contribution.

Traditional IRA or ROTH IRA

Not sure which is best for you? There is no tax deduction for ROTH IRA contributions but they have other features that I think make them one of the most useful retirement account options available. Learn more in Traditional IRA or ROTH IRA.

Traditional IRA or HSA

An HSA is a Health Savings Account. With an HSA you can make a deductible contribution and the money grows tax-free if used for health care expenses. I think may people would benefit from funding an HSA instead of an IRA. Learn more in Why Fund an HSA instead of an IRA.

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