LexION Blog

There’s Still Time to Make Your IRA Contribution for 2014

If you haven’t yet made a full contribution to your IRA for 2014, you still have time to contribute before the April 15th deadline.

How much can I contribute?

There are a few factors that will affect how much you can contribute to your IRA.

  1. The maximum annual contribution

Different types of retirement accounts have different annual contribution limits. In addition, the amount you can contribute to an IRA may also change depending on your age and/or income.

The maximum annual contribution for the 2014 and 2015 tax years for a Roth IRA or a traditional IRA…

…is $5,500 if you’re under 50 years old, or $6,500 if you’re 50 or older.*

…cannot exceed the total income you earned for the year.

  1. Your age

You can contribute to a Roth IRA at any age. But with a traditional IRA, you must be under age 70½ to contribute.

*If you are over age 50, you qualify for what is sometimes called a “catch up contribution:” you can contribute an additional $1,000 per year to your IRA, making the maximum annual contribution $6,500.

  1. Your income

The same general contribution limit applies to both Roth and traditional IRAs, but your income and tax filing status may further affect how much you can contribute to a Roth IRA.

Your tax filing status and your modified adjusted gross income (MAGI) will dictate whether you can make the full contribution to your Roth IRA (meaning the maximum annual contribution of $5,500, or $6,500 for those age 50 and older). Individuals who fall within a certain MAGI range are subject to “phase out” parameters set by the IRS, which reduce the maximum Roth IRA contribution you can make.

MAGI

Source: www.irs.gov

Can I deduct my IRA contribution from my taxes?

With a Roth IRA, you can’t deduct your contribution. Your Roth IRA contributions are made with after-tax money (i.e., your take-home pay), and qualified withdrawals will be tax-free.

With a traditional IRA, some or all of the amount you contribute can be claimed as a tax deduction. The amount that you can deduct may be affected if you or your spouse is already covered by a retirement plan at work. The IRS website gives details about deduction limits.