2012 IRA Contribution and Deduction Limits
2012 Combined Traditional and Roth IRA Contribution Limits
Traditional IRA’s and Roth IRA’s are just two of the tax-advantaged retirement plans available. While these plans can make saving for retirement a little easier, there are some simple yet tricky rules to these plans you should be aware of. Not the sexiest stuff out there, but here it is…
Anyone with at least $5,000 of taxable income this year can make a contribution to a traditional IRA. You may or may not be able to deduct your contribution depending on your income level, marital status, and whether or not you or your spouse have available retirement savings plans at work.
If you are under age 50, the maximum contribution you can make to a traditional IRA and Roth IRA combined is the smaller of $5,000 or taxable compensation. This amount goes up to $6,000 if you are age 50 or over before the end of 2012.
Here are the income phase-out ranges for 2012
Traditional IRA
Filing Status Income phase-out range for deduction
Single or Head of Household NOT covered by an employer retirement plan Full deduction
Single or Head of Household covered by an employer retirement plan $58,000 to $68,000
Married Filing Jointly neither spouse covered by employer plan Full deduction
Married and both covered by an employer plan $92,000 to $112,000
Married and spouse covered by employer plan $173,000 to $183,000
Married Filing Separately $zero to $10,000
You may not be able to contribute to a Roth IRA at all if your income is too high.
Roth IRA
Filing Status Income phase-out range for eligibility
Single/Head of Household/Married Filing Separately $110,000 to $125,000
Married Filing Jointly $173,000 to $183,000
- The above phase-out ranges are based on your modified adjusted gross income. Contributions you make to a traditional IRA may be fully or partially deductible from your gross income on your federal income tax return for the year in which the contribution is made. Earnings and tax-deductible contributions in your Traditional IRA account are generally not taxed until you begin taking withdrawals.
- If your MAGI is below the range listed above for the traditional IRA, you can take a full deduction on your tax return for your IRA contribution. If you fall within the range you will get a partial deduction, and anything above the range will disqualify you from taking any deduction on your contribution.
- Contributions to a Roth IRA are not tax deductible. However, because you fund Roth IRAs with after-tax dollars, contributions are not taxed upon withdrawal. You can actually take out your principal at any time from a Roth without having to pay any tax or penalties and you can take it out for any reason! That is where I go from liking the Roth to LOVING it. If used properly, the earnings on your investments can also be tax-free. All that needs to be done here is to have the Roth IRA open for at least 5 years and you must be older than 59 1/2. Think the Roth is starting to sound like a savings account? Some folks do in fact use their Roth as part of their emergency fund or part of their college funding plan because of it’s flexibility.
(photo by ScottWills on Flickr)
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