With the 2023 tax year behind us, investors are gearing up to boost their retirement funds for their 2024 IRAs, following the updated annual contribution limits. Staying informed about the latest changes set by the Internal Revenue Service (IRS) regarding IRAs can help you maximize savings.
IRA Contribution Details for 2024
The IRS has increased the contribution limits for the tax year 2024. Here's the breakdown:
- For individuals under the age of 50, the general IRA contribution limit is now set at $7,000, a $500 increase from the 2023 tax year.
- For those 50 and older, you can contribute up to $8,000 in your IRA, leveraging the additional 'catch-up' contribution.
These adjustments, compared to the 2023 limits, offer savers an enhanced opportunity to accumulate more for their retirement years. The announcement of the increased contribution limits was part of the cost of living adjustments for pension plans and other retirement-related items for the 2024 tax year.
If you have not yet started your IRA contributions for this period, you have until Tax Day of 2025 to make your contributions.
Impact of Income on IRA Contributions
Roth IRA Contributions
Your Modified Adjusted Gross Income (MAGI) determines your contribution capacity to an IRA, particularly for a Roth IRA. The Roth IRA imposes specific income limits for 2024 based on your filing status. For example, single filers and heads of household face specific MAGI thresholds which, if met or exceeded, may reduce or entirely prohibit contributions to a Roth IRA. Notably, these limits have increased from those established for the 2023 tax year.
|
Roth IRA Contribution Limits (Tax Year 2024) | ||||
|
Single Filers (MAGI) |
Married Filing Jointly (MAGI) |
Married Filing Separately (MAGI) |
Maximum Contribution for Individuals under age 50 |
Maximum Contribution for individuals age 50 & older |
|
Under $146,000 |
Under $230,000 |
$0 |
$7,000 |
$8,000 |
|
$147,500 |
$231,000 |
$0 |
$6,300 |
$7,200 |
|
$149,000 |
$232,000 |
$0 |
$5,600 |
$6,400 |
|
$150,500 |
$233,000 |
$0 |
$4,900 |
$5,600 |
|
$152,500 |
$234,000 |
$0 |
$4,200 |
$4,800 |
|
$153,500 |
$235,000 |
$0 |
$3,500 |
$4,000 |
|
$155,000 |
$236,000 |
$0 |
$2,800 |
$3,200 |
|
$156,500 |
$237,000 |
$0 |
$2,100 |
$2,400 |
|
$158,000 |
$238,000 |
$0 |
$1,400 |
$1,600 |
|
$159,500 |
$239,000 |
$0 |
$700 |
$800 |
|
$161,000 & over |
$240,000 & over |
$10,000 & over |
$0 |
$0 |
Traditional IRA Contributions
On the other hand, Traditional IRAs function differently. While there's no direct income limit that curtails your ability to contribute, the tax deductions you can claim on those contributions can be influenced by your MAGI, especially if you or your spouse are covered by a workplace retirement plan.
To learn more about IRA contribution limits, click here.
Deductions and Tax Implications on IRA Contributions
The decision to contribute to a Roth IRA versus a Traditional IRA can have varying tax implications. Roth IRA contributions, for instance, do not offer upfront tax deductions. However, a significant advantage is that when the time comes to withdraw in retirement, those distributions in a Roth IRA are typically tax-free.
Conversely, contributions to a Traditional IRA can potentially be deducted from your taxes, depending on certain conditions. One of the key determining factors is whether you or your spouse are covered by an employer-sponsored retirement plan. If you are, the amount you can deduct may be limited based on your MAGI and your tax filing status. It's also essential to be aware of the phase-out ranges for these deductions, which have been adjusted from 2023 to 2024.
Making the Most of Retirement
Understanding the nuances of IRA contribution limits is important, especially as the IRS increases limits. Being well-informed allows individuals to make the most of their retirement savings opportunities, especially in their IRA. As always, it's advisable to periodically review your contributions and ensure everything aligns with the prevailing regulations.
To learn more about creating an IRA that suits your lifestyle needs or retirement goals, open an account today at iTrustCapital!
NOTE: This article is not investment or tax advice. Please consult with your tax professional.
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