What Is The Most I Can Contribute To My IRA?

IRA accounts can be a great tool for savers. Traditional IRA accounts can allow one to save on a tax-deferred basis for retirement. Taxes on a traditional IRA are paid when distributions are made. For 2020-2021, the maximum allowed contribution to all traditional and Roth IRA accounts is $6,000 for those under the age of 50 and $7,000 for those 50 and older. These contribution limits do not apply to rollover contributions or qualified reservist payments.

2021 Contribution Limits

The contribution limits are different for Roth IRA accounts. These limits for 2021 are as follows:

• Married filing jointly or qualifying widow(er) s with modified AGIs of less than $198,000 may contribute up to the contribution limit amounts.
• Married filing jointly or qualifying widow(er) s with modified AGIs of greater than $198,000 but less than $208,000 may make a reduced contribution.
• Married filing jointly or qualified widow(er) s with modified AGIs greater than $208,000 may not make a contribution.
• For married persons filing separately who lived with their spouse at any time during the year, modified AGIs of less than $10,000 may make a reduced contribution while modified AGIs of greater than or equal to $10,000 may not make a contribution.
• Single persons, heads of household and married filing separately who did not live with their spouse at any time during the year with modified AGIs of less than $125,000 may make a full contribution up to the contribution limits.
• Single persons, heads of household and married filing separately who did not live with their spouse at any time during the year with modified AGIs greater than $125,000 but less than $140,000 may make a partial deduction.
• Single persons, heads of household and married filing separately who did not live with their spouse at any time during the year with modified AGIs equal to or greater than $140,000 may not make a contribution.

Reduced Contribution Limits

Reduced contribution amounts must be calculated per IRS instructions. These instructions from the IRS website are:

1. “Start with your modified AGI.
2. Subtract from the amount in (1):
   1. $198,000 if filing a joint return or qualifying widow(er),
   2. $-0- if married filing a separate return, and you lived with your spouse at any time during the year, or
   3. $125,000 for all other individuals.
3. Divide the result in (2) by $15,000 ($10,000 if filing a joint return, qualifying widow(er), or married filing a separate return and you lived with your spouse at any time during the year).
4. Multiply the maximum contribution limit (before reduction by this adjustment and before reduction for any contributions to traditional IRAs) by the result in (3).
5. Subtract the result in (4) from the maximum contribution limit before this reduction. The result is your reduced contribution limit.”

Source: irs.gov

Tax Deductions For Traditional IRAs

Contributions made to traditional IRA accounts may be tax-deductible. This potential tax-deduction may be limited, however, if your income exceeds certain levels or if you or your spouse has a retirement plan through your or their employer. The potential tax-deductions for traditional IRA accounts are as follows:

2021-If covered by an employer retirement plan then:

1. Single persons or heads of household who earn $66,000 or less may take a full deduction up to the contribution limit amount of either $6000 or $7000.
2. Single persons or heads of household who earn more than $66,000 but less than $76,000 may take a partial deduction.
3. Single persons or heads of household that earn over 76,000 may not take a deduction.
4. Married filing jointly or qualified widow(er) who earn less than $105,000 may take a full deduction up to the appropriate contribution limit amount.
5. Married filing jointly or qualified widow(er) earning more than $105,000 but less than $125,000 may take a partial deduction.
6. Married filing jointly or qualified widow(er) earning more than $125,000 may not take a deduction.
7. Married filing separately with a modified AGI of less than $10,000 may take a partial deduction.
8. Married filing separately with a modified AGI greater than $10,000 may not take a deduction.

2021-If not covered by an employer retirement plan then:

• Single persons, heads of households and qualified widow(er) s may take a deduction up to the full contribution limit regardless of income.
• Married filing jointly or separately (when spouse is not covered by plan at work) may take a full deduction up to the contribution limit amount regardless of income.
• Married filing separately when a spouse is covered by a retirement plan at work can take a partial deduction if their AGI is less than $10,000 and cannot take a deduction if their AGI is greater than $10,000.

IRA accounts can be a great way to accumulate precious metals. Although the annual contribution limits on IRA accounts may be small in comparison to 401(k) or other retirement programs, they nevertheless provide investors with a great vehicle to save for retirement on a tax-deferred basis or after-tax basis. Precious metals can be purchased within an IRA account although one cannot take physical possession of the metals unless they take a distribution.

None of the material contained here is intended to be or should be construed as tax advice. This material is for informational purposes only and is a basic guide. For any tax related questions, one should always consult their own CPA or tax professional.